The compensation of the CEO of Chongqing Machinery & Electric Co., Ltd. (HKG: 2722) seems acceptable to us and here is why

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Performance at Chongqing Machinery & Electric Co., Ltd. (HKG: 2722) has been rather boring lately and shareholders may be wondering how CEO Ping Chen is going to fix this. At the next Annual General Meeting on June 24, 2021, they will have the opportunity to exercise their voting rights in order to influence the future direction of the company. Voting on executive compensation could be an effective way to influence management, as studies have shown that the right compensation incentives have an impact on business performance. We have prepared some analyzes below to show that the remuneration of the CEOs appears appropriate.

Check out our latest analysis for Chongqing Machinery & Electric

How does Ping Chen total compensation compare to other companies in the industry?

Our data shows that Chongqing Machinery & Electric Co., Ltd. Has a market capitalization of HK $ 2.0 billion and the total annual CEO compensation for the year ended December 2020 was CN ¥ 704,000. We find that this is down from a 30% decrease last year. We find that the salary of CN ¥ 387.4k is a significant part of the CEO’s total compensation.

For comparison: other companies in the same industry with a market capitalization between HK $ 776 million and HK $ 3.1 billion had an average total CEO compensation of CN ¥ 2.2 million. Accordingly, Chongqing Machinery & Electric pays its CEO below the industry median.

component 2020 2019 Share (2020)
salary CN ¥ 387k CN ¥ 443k 55%
Other CN ¥ 317k CN ¥ 561k 45%
Total compensation CN ¥ 704k CN ¥ 1.0m 100%

At the industry level, nearly 59% of total compensation is salary, while the remainder of 41% is other compensation. Our data shows that Chongqing Machinery & Electric distributes salaries more or less according to the broader market. When salary dominates total compensation, it suggests that CEO compensation is less focused on the variable component that is usually linked to performance.

SEHK: 2722 Management Board remuneration June 18, 2021

A look at Chongqing Machinery & Electric Co., Ltd.’s growth numbers

For the past three years, Chongqing Machinery & Electric Co., Ltd. its earnings per share have shrunk 18% per year. It achieved sales growth of 15% last year.

Investors would be a little suspicious of companies with lower earnings per share. In contrast, however, sales growth is strong, suggesting future potential for earnings growth. It is difficult to make a statement about the development of the business at the moment. This can possibly be observed. While we don’t have any analyst predictions for the company, shareholders should check out this detailed historical graph of earnings, revenue, and cash flow.

Was Chongqing Machinery & Electric Co., Ltd. a good investment?

Given the total shareholder loss of 14% over three years, many shareholders of Chongqing Machinery & Electric Co., Ltd. probably rather dissatisfied, to say the least. This suggests that paying the CEO too generously would be unwise.

Conclude…

Shareholders will be disappointed with the share price development when they go to the annual general meeting. One reason for the lackluster price development could be that the profits simply did not increase significantly. Shareholders are given the opportunity to ask the Management Board about important matters and to reconsider their investment thesis in relation to the company.

We can learn a lot about a company by studying CEO compensation trends and looking at other aspects of the business. We have identified 3 warning signs for Chongqing Machinery & Electric (1 makes us a little uncomfortable!) That you should know before investing here.

Naturally, You could find a fantastic investment by looking at a different range of stocks. So check this out free List of interesting companies.

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This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamentals. Note that our analysis may not take into account the latest company announcements or quality material, which may be sensitive to the price. Simply Wall St has no position in the stocks mentioned.
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