We Think Shanghai Dazhong Public Utilities(Group) Co.,Ltd.'s (SHSE:600635) CEO Compensation Package Needs To Be Put Under A Microscope

Simply Wall St ·  Jun 11 18:35

Key Insights

  • Shanghai Dazhong Public Utilities(Group)Ltd will host its Annual General Meeting on 18th of June
  • Total pay for CEO Jiawei Liang includes CN¥2.29m salary
  • The total compensation is 169% higher than the average for the industry
  • Over the past three years, Shanghai Dazhong Public Utilities(Group)Ltd's EPS fell by 50% and over the past three years, the total loss to shareholders 21%

Shareholders will probably not be too impressed with the underwhelming results at Shanghai Dazhong Public Utilities(Group) Co.,Ltd. (SHSE:600635) recently. At the upcoming AGM on 18th of June, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

Comparing Shanghai Dazhong Public Utilities(Group) Co.,Ltd.'s CEO Compensation With The Industry

According to our data, Shanghai Dazhong Public Utilities(Group) Co.,Ltd. has a market capitalization of CN¥7.5b, and paid its CEO total annual compensation worth CN¥2.9m over the year to December 2023. We note that's an increase of 27% above last year. Notably, the salary which is CN¥2.29m, represents most of the total compensation being paid.

On examining similar-sized companies in the Chinese Gas Utilities industry with market capitalizations between CN¥2.9b and CN¥12b, we discovered that the median CEO total compensation of that group was CN¥1.1m. Accordingly, our analysis reveals that Shanghai Dazhong Public Utilities(Group) Co.,Ltd. pays Jiawei Liang north of the industry median. Moreover, Jiawei Liang also holds CN¥616k worth of Shanghai Dazhong Public Utilities(Group)Ltd stock directly under their own name.

Component20232022Proportion (2023)
Salary CN¥2.3m CN¥2.5m 79%
Other CN¥625k 21%
Total CompensationCN¥2.9m CN¥2.3m100%

Speaking on an industry level, nearly 77% of total compensation represents salary, while the remainder of 23% is other remuneration. Although there is a difference in how total compensation is set, Shanghai Dazhong Public Utilities(Group)Ltd more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

SHSE:600635 CEO Compensation June 11th 2024

Shanghai Dazhong Public Utilities(Group) Co.,Ltd.'s Growth

Shanghai Dazhong Public Utilities(Group) Co.,Ltd. has reduced its earnings per share by 50% a year over the last three years. It achieved revenue growth of 6.7% over the last year.

Overall this is not a very positive result for shareholders. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Shanghai Dazhong Public Utilities(Group) Co.,Ltd. Been A Good Investment?

Since shareholders would have lost about 21% over three years, some Shanghai Dazhong Public Utilities(Group) Co.,Ltd. investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 3 warning signs for Shanghai Dazhong Public Utilities(Group)Ltd that investors should be aware of in a dynamic business environment.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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