In 2016 Jeffrey Lu was appointed CEO of China Mengniu Dairy Company Limited (HKG:2319). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Jeffrey Lu's Compensation Compare With Similar Sized Companies?
Our data indicates that China Mengniu Dairy Company Limited is worth HK$127b, and total annual CEO compensation is CN¥13m. (This is based on the year to December 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at CN¥7.0m. When we examined a group of companies with market caps over CN¥56b, we found that their median CEO total compensation was CN¥5.5m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Thus we can conclude that Jeffrey Lu receives more in total compensation than the median of a group of large companies in the same market as China Mengniu Dairy Company Limited. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see, below, how CEO compensation at China Mengniu Dairy has changed over time.
Is China Mengniu Dairy Company Limited Growing?
China Mengniu Dairy Company Limited has increased its earnings per share (EPS) by an average of 25% a year, over the last three years (using a line of best fit). It achieved revenue growth of 15% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Shareholders might be interested in this free visualization of analyst forecasts.
Has China Mengniu Dairy Company Limited Been A Good Investment?
Most shareholders would probably be pleased with China Mengniu Dairy Company Limited for providing a total return of 127% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
We compared the total CEO remuneration paid by China Mengniu Dairy Company Limited, and compared it to remuneration at a group of other large companies. Our data suggests that it pays above the median CEO pay within that group.
However we must not forget that the EPS growth has been very strong over three years. Even better, returns to shareholders have been plentiful, over the same time period. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at China Mengniu Dairy.
Important note: China Mengniu Dairy may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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