Key Insights

• Lihuayi Weiyuan Chemical's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 5 shareholders own 54% of the company
• 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 Lihuayi Weiyuan Chemical Co., Ltd. (SHSE:600955), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 34% to be precise, is individual investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, individual investors benefitted the most after the company's market cap rose by CN¥391m last week.

In the chart below, we zoom in on the different ownership groups of Lihuayi Weiyuan Chemical.

What Does The Institutional Ownership Tell Us About Lihuayi Weiyuan Chemical?

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.

We can see that Lihuayi Weiyuan Chemical does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Lihuayi Weiyuan Chemical, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Lihuayi Weiyuan Chemical. Looking at our data, we can see that the largest shareholder is Weiyuan Holdings Co., Ltd. with 20% of shares outstanding. Dongying Yuanda Investment Management Center (Limited Partnership) is the second largest shareholder owning 11% of common stock, and Dongying Yongyi Investment Management Center (Limited Partnership) holds about 9.9% of the company stock. Additionally, the company's CEO Xiumin Li directly holds 0.6% of the total shares outstanding.

On looking further, we found that 54% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Lihuayi Weiyuan Chemical

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.

Shareholders would probably be interested to learn that insiders own shares in Lihuayi Weiyuan Chemical Co., Ltd.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around CN¥256m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 34% stake in Lihuayi Weiyuan Chemical. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

Private equity firms hold a 30% stake in Lihuayi Weiyuan Chemical. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

It seems that Private Companies own 23%, of the Lihuayi Weiyuan Chemical stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Lihuayi Weiyuan Chemical (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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