Key Insights

• China Shengmu Organic Milk will host its Annual General Meeting on 14th of June
• Salary of CN¥4.92m is part of CEO Jiawang Zhang's total remuneration
• The total compensation is 406% higher than the average for the industry
• Over the past three years, China Shengmu Organic Milk's EPS fell by 42% and over the past three years, the total loss to shareholders 66%

China Shengmu Organic Milk Limited (HKG:1432) has not performed well recently and CEO Jiawang Zhang will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 14th of June. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Comparing China Shengmu Organic Milk Limited's CEO Compensation With The Industry

According to our data, China Shengmu Organic Milk Limited has a market capitalization of HK$1.6b, and paid its CEO total annual compensation worth CN¥9.1m over the year to December 2023. We note that's an increase of 14% above last year. Notably, the salary which is CN¥4.92m, represents a considerable chunk of the total compensation being paid.

For comparison, other companies in the Hong Kong Food industry with market capitalizations ranging between HK$781m and HK$3.1b had a median total CEO compensation of CN¥1.8m. Accordingly, our analysis reveals that China Shengmu Organic Milk Limited pays Jiawang Zhang north of the industry median. What's more, Jiawang Zhang holds HK$28m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, nearly 74% of total compensation represents salary, while the remainder of 26% is other remuneration. China Shengmu Organic Milk pays a modest slice of remuneration through salary, as compared to the broader industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at China Shengmu Organic Milk Limited's Growth Numbers

Over the last three years, China Shengmu Organic Milk Limited has shrunk its earnings per share by 42% per year. In the last year, its revenue is up 6.5%.

Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has China Shengmu Organic Milk Limited Been A Good Investment?

With a total shareholder return of -66% over three years, China Shengmu Organic Milk Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 2 warning signs for China Shengmu Organic Milk that investors should look into moving forward.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.