Key Insights

• Significant control over Dirui IndustrialLtd by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 52% of the business is held by the top 4 shareholders
• Insiders own 14% of Dirui IndustrialLtd

Every investor in Dirui Industrial Co.,Ltd. (SZSE:300396) should be aware of the most powerful shareholder groups. With 40% stake, private equity firms possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 11% decline in share price, private equity firms suffered the most losses.

Let's delve deeper into each type of owner of Dirui IndustrialLtd, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Dirui IndustrialLtd?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Dirui IndustrialLtd. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Dirui IndustrialLtd's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Dirui IndustrialLtd. Our data shows that China Resources Capital Management Limited is the largest shareholder with 28% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 12% and 6.3%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Dirui IndustrialLtd

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

It seems insiders own a significant proportion of Dirui Industrial Co.,Ltd.. Insiders own CN¥851m worth of shares in the CN¥6.0b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Dirui IndustrialLtd. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

Private equity firms hold a 40% stake in Dirui IndustrialLtd. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Dirui IndustrialLtd better, we need to consider many other factors. Be aware that Dirui IndustrialLtd is showing 1 warning sign in our investment analysis , you should know about...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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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