Chongqing Iron & Steel Company Limited (HKG:1053) share price fell 7.1% last week; individual investors would not be happy

If you want to know who actually controls Chongqing Iron & Steel Company Limited (HKG:1053), then you will need to look at the composition of its share register. With a 43% stake, individual investors hold the most shares in the company. In other words, the group is likely to gain the most (or lose the most) from its investment in the business.

As the market capitalization fell to HK$14 billion last week, individual investors would have suffered the highest losses than any other group of shareholders in the company.

In the table below, we zoom in on the different ownership groups of Chongqing Iron & Steel.

Our analysis indicates that 1053 is potentially undervalued!

SEHK: 1053 Ownership Breakdown October 29, 2022

What does institutional ownership tell us about Chongqing Iron & Steel?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it is included in a major index. We would expect most companies to have some institutions listed, especially if they are growing.

As you can see, institutional investors hold a sizeable share of Chongqing Iron & Steel. This suggests some credibility with professional investors. But we cannot rely solely on this fact since institutions sometimes make bad investments, like everyone else. If multiple institutions change their minds on a stock at the same time, you could see the stock price drop quickly. So it is worth checking out Chongqing Iron & Steel’s earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
SEHK: 1053 Earnings and Revenue Growth October 29, 2022

Hedge funds do not have many shares in Chongqing Iron & Steel. Chongqing Changshou Iron & Steel Company Limited is currently the company’s largest shareholder with 24% of the outstanding shares. Meanwhile, the second and third largest shareholders hold 4.8% and 3.2% of the outstanding shares respectively.

A closer look at our ownership figures suggests that the top 11 shareholders hold a combined ownership of 52%, implying that no single shareholder has a majority.

While it makes sense to study data on a company’s institutional ownership, it also makes sense to study analyst sentiment to find out which way the wind is blowing. We don’t see any analyst coverage of the stock at this time, so the company is unlikely to be widely held.

Insider ownership of Chongqing Iron & Steel

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. In particular, sometimes the senior executives themselves sit on the board of directors.

I generally consider insider ownership to be a good thing. However, there are times when it is more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders hold less than 1% of Chongqing Iron & Steel Company Limited in their own name. However, insiders may have an indirect interest through a more complex structure. Keep in mind this is a big company and insiders hold HK$74 million worth of shares. The absolute value can be more important than the proportional share. It’s good to see board members owning stock, but it can be helpful to check whether those insiders have bought.

General public property

With a 43% stake, the general public, consisting mainly of individual investors, has some influence over Chongqing Iron & Steel. While that size of ownership might not be enough to sway a policy decision in their favor, they can still have a collective impact on company policies.

Private Company Ownership

We can see that private companies hold 41% of the issued shares. It’s hard to draw conclusions from this fact alone, so it’s worth investigating who owns these private companies. Sometimes insiders or other related parties have an interest in shares of a public company through a separate private company.

Next steps:

While it is worth considering the different groups that own a business, there are other, even more important factors. For example, we found 2 warning signs for Chongqing Iron & Steel which you should be aware of before investing here.

Sure this may not be the best stock to buy. Therefore, you may want to see our free set of interesting prospects benefiting from a favorable financial situation.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month the financial statements are dated. This may not be consistent with the annual report figures for the full year.

Valuation is complex, but we help make it simple.

Find out if Chongqing Iron and Steel is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Karen J. Nelson