Retail investors are AVIC Heavy Machinery Co., Ltd.'s (SHSE:600765) biggest owners and were hit after market cap dropped CN¥2.0b

Simply Wall St · 10/16 22:40

Key Insights

  • Significant control over AVIC Heavy Machinery by retail investors implies that the general public has more power to influence management and governance-related decisions
  • The top 25 shareholders own 50% of the company
  • 17% of AVIC Heavy Machinery is held by Institutions

To get a sense of who is truly in control of AVIC Heavy Machinery Co., Ltd. (SHSE:600765), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, retail investors as a group endured the highest losses last week after market cap fell by CN¥2.0b.

In the chart below, we zoom in on the different ownership groups of AVIC Heavy Machinery.

See our latest analysis for AVIC Heavy Machinery

ownership-breakdown
SHSE:600765 Ownership Breakdown October 16th 2024

What Does The Institutional Ownership Tell Us About AVIC Heavy Machinery?

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.

AVIC Heavy Machinery already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 AVIC Heavy Machinery's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SHSE:600765 Earnings and Revenue Growth October 16th 2024

We note that hedge funds don't have a meaningful investment in AVIC Heavy Machinery. Our data shows that Aviation Industry Corporation of China,Ltd. is the largest shareholder with 29% of shares outstanding. AVIC Industry-Finance Holdings Co., Ltd. is the second largest shareholder owning 5.1% of common stock, and SDIC Unity Capital Co., Ltd. holds about 1.9% of the company stock.

A closer look at our ownership figures suggests that the top 25 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of AVIC Heavy Machinery

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Our data suggests that insiders own under 1% of AVIC Heavy Machinery Co., Ltd. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥33m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 48% stake in AVIC Heavy Machinery. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

We can see that Private Companies own 30%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Public Company Ownership

We can see that public companies hold 5.1% of the AVIC Heavy Machinery shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand AVIC Heavy Machinery better, we need to consider many other factors. For example, we've discovered 2 warning signs for AVIC Heavy Machinery (1 is a bit unpleasant!) that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.