Key Insights

• Insiders appear to have a vested interest in Hengerda New Materials (Fujian)'s growth, as seen by their sizeable ownership
• The largest shareholder of the company is Zhenghua Lin with a 66% stake
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Hengerda New Materials (Fujian) Co., Ltd. (SZSE:300946), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 70% to be precise, is individual insiders. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, insiders benefitted the most after the company's market cap rose by CN¥371m last week.

Let's take a closer look to see what the different types of shareholders can tell us about Hengerda New Materials (Fujian).

What Does The Institutional Ownership Tell Us About Hengerda New Materials (Fujian)?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Since institutions own only a small portion of Hengerda New Materials (Fujian), many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

Hengerda New Materials (Fujian) is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO Zhenghua Lin with 66% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. Meanwhile, the second and third largest shareholders, hold 2.2% and 1.6%, of the shares outstanding, respectively. Interestingly, the second-largest shareholder, Zhengxiong Lin is also Senior Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Hengerda New Materials (Fujian)

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Our information suggests that insiders own more than half of Hengerda New Materials (Fujian) Co., Ltd.. This gives them effective control of the company. That means they own CN¥2.2b worth of shares in the CN¥3.1b company. That's quite meaningful. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 24% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hengerda New Materials (Fujian). 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Hengerda New Materials (Fujian) better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Hengerda New Materials (Fujian) you should be aware of, and 2 of them shouldn't be ignored.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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