Key Insights

• Huazhong In-Vehicle Holdings will host its Annual General Meeting on 3rd of June
• CEO Minfeng Zhou's total compensation includes salary of CN¥1.37m
• The overall pay is 95% above the industry average
• Huazhong In-Vehicle Holdings' EPS declined by 29% over the past three years while total shareholder return over the past three years was 13%

Despite Huazhong In-Vehicle Holdings Company Limited's (HKG:6830) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 3rd of June. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

How Does Total Compensation For Minfeng Zhou Compare With Other Companies In The Industry?

At the time of writing, our data shows that Huazhong In-Vehicle Holdings Company Limited has a market capitalization of HK$4.1b, and reported total annual CEO compensation of CN¥1.9m for the year to December 2023. This means that the compensation hasn't changed much from last year. In particular, the salary of CN¥1.37m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar companies from the Hong Kong Auto Components industry with market caps ranging from HK$1.6b to HK$6.3b, we found that the median CEO total compensation was CN¥988k. This suggests that Minfeng Zhou is paid more than the median for the industry. What's more, Minfeng Zhou holds HK$3.0b worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 83% of total compensation out of all the companies we analyzed, while other remuneration made up 17% of the pie. Huazhong In-Vehicle Holdings sets aside a smaller share of compensation for salary, in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Huazhong In-Vehicle Holdings Company Limited's Growth Numbers

Huazhong In-Vehicle Holdings Company Limited has reduced its earnings per share by 29% a year over the last three years. It saw its revenue drop 3.9% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Huazhong In-Vehicle Holdings Company Limited Been A Good Investment?

With a total shareholder return of 13% over three years, Huazhong In-Vehicle Holdings Company Limited shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for Huazhong In-Vehicle Holdings (1 doesn't sit too well with us!) that you should be aware of before investing here.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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.