Key Insights

• Hua Medicine (Shanghai) to hold its Annual General Meeting on 27th of June
• Total pay for CEO Li Chen includes CN¥5.74m salary
• The overall pay is 310% above the industry average
• Hua Medicine (Shanghai)'s EPS grew by 29% over the past three years while total shareholder loss over the past three years was 69%

The underwhelming share price performance of Hua Medicine (Shanghai) Ltd. (HKG:2552) in the past three years would have disappointed many shareholders. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 27th of June could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Comparing Hua Medicine (Shanghai) Ltd.'s CEO Compensation With The Industry

According to our data, Hua Medicine (Shanghai) Ltd. has a market capitalization of HK$1.6b, and paid its CEO total annual compensation worth CN¥17m over the year to December 2023. Notably, that's a decrease of 25% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at CN¥5.7m.

On comparing similar companies from the Hong Kong Pharmaceuticals industry with market caps ranging from HK$780m to HK$3.1b, we found that the median CEO total compensation was CN¥4.2m. Hence, we can conclude that Li Chen is remunerated higher than the industry median. Moreover, Li Chen also holds HK$63m worth of Hua Medicine (Shanghai) stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 65% of total compensation represents salary and 35% is other remuneration. Hua Medicine (Shanghai) sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Hua Medicine (Shanghai) Ltd.'s Growth Numbers

Hua Medicine (Shanghai) Ltd.'s earnings per share (EPS) grew 29% per year over the last three years. It achieved revenue growth of 335% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Hua Medicine (Shanghai) Ltd. Been A Good Investment?

The return of -69% over three years would not have pleased Hua Medicine (Shanghai) Ltd. shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

Shareholders may want to check for free if Hua Medicine (Shanghai) insiders are buying or selling shares.

Important note: Hua Medicine (Shanghai) is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com