Key Insights

• SANVO Fine Chemicals Group will host its Annual General Meeting on 28th of June
• Salary of CN¥214.0k is part of CEO Ernest Chen's total remuneration
• Total compensation is similar to the industry average
• SANVO Fine Chemicals Group's three-year loss to shareholders was 2.3% while its EPS was down 55% over the past three years

Shareholders will probably not be too impressed with the underwhelming results at SANVO Fine Chemicals Group Limited (HKG:301) recently. At the upcoming AGM on 28th of June, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Comparing SANVO Fine Chemicals Group Limited's CEO Compensation With The Industry

At the time of writing, our data shows that SANVO Fine Chemicals Group Limited has a market capitalization of HK$564m, and reported total annual CEO compensation of CN¥1.2m for the year to December 2023. Notably, that's a decrease of 12% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at CN¥214k.

In comparison with other companies in the Hong Kong Chemicals industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was CN¥1.6m. So it looks like SANVO Fine Chemicals Group compensates Ernest Chen in line with the median for the industry. What's more, Ernest Chen holds HK$414m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 74% of total compensation represents salary and 26% is other remuneration. In SANVO Fine Chemicals Group's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at SANVO Fine Chemicals Group Limited's Growth Numbers

Over the last three years, SANVO Fine Chemicals Group Limited has shrunk its earnings per share by 55% per year. It achieved revenue growth of 14% over the last year.

The decline in EPS is a bit concerning. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has SANVO Fine Chemicals Group Limited Been A Good Investment?

Since shareholders would have lost about 2.3% over three years, some SANVO Fine Chemicals Group Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a 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 pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 3 warning signs for SANVO Fine Chemicals Group you should be aware of, and 2 of them can't be ignored.

Important note: SANVO Fine Chemicals Group 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