002971.SZ WACC - Weighted Average Cost of Capital

The WACC of Hubei Heyuan Gas Co Ltd (002971.SZ) is 9.8%.

The Cost of Equity of Hubei Heyuan Gas Co Ltd (002971.SZ) is 12.85%.

The Cost of Debt of Hubei Heyuan Gas Co Ltd (002971.SZ) is 5.00%.

	Range	Selected
Cost of equity	10.90% - 14.80%	12.85%
Tax rate	11.30% - 13.30%	12.30%
Cost of debt	5.00% - 5.00%	5.00%
WACC	8.6% - 11.1%	9.8%

WACC

002971.SZ WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	1.35	1.56

Additional risk adjustments	0.0%	0.5%
Cost of equity	10.90%	14.80%

Tax rate	11.30%	13.30%
Debt/Equity ratio	0.56	0.56
Cost of debt	5.00%	5.00%

After-tax WACC	8.6%	11.1%


Selected WACC	9.8%

002971.SZ's CAPM model and how its cost of Equity is calculated

The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.

This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.

Here’s how we figure out the cost of equity for 002971.SZ:

cost_of_equity (12.85%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (1.35) + risk_adjustments (0.25%)

We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.