Key Insights

• Significant control over Hengli PetrochemicalLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 51% of the company
• 22% of Hengli PetrochemicalLtd is held by insiders

Every investor in Hengli Petrochemical Co.,Ltd. (SHSE:600346) should be aware of the most powerful shareholder groups. We can see that private companies own the lion's share in the company with 32% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutions on the other hand have a 29% ownership in the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders.

In the chart below, we zoom in on the different ownership groups of Hengli PetrochemicalLtd.

What Does The Institutional Ownership Tell Us About Hengli PetrochemicalLtd?

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.

Hengli PetrochemicalLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Hengli PetrochemicalLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Hengli PetrochemicalLtd. Hengli Group Co.,Ltd is currently the company's largest shareholder with 30% of shares outstanding. For context, the second largest shareholder holds about 22% of the shares outstanding, followed by an ownership of 21% by the third-largest shareholder. Hongwei Fan, who is the second-largest shareholder, also happens to hold the title of Senior Key Executive.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Hengli PetrochemicalLtd

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems insiders own a significant proportion of Hengli Petrochemical Co.,Ltd.. It has a market capitalization of just CN¥103b, and insiders have CN¥22b worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 18% stake in Hengli PetrochemicalLtd. 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 Company Ownership

We can see that Private Companies own 32%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Hengli PetrochemicalLtd (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.