The WACC of Hua Hong Semiconductor Ltd (1347.HK) is 8.9%.
Range | Selected | |
Cost of equity | 10.0% - 12.5% | 11.25% |
Tax rate | 17.2% - 19.6% | 18.4% |
Cost of debt | 4.0% - 5.2% | 4.6% |
WACC | 7.9% - 9.9% | 8.9% |
Category | Low | High |
Long-term bond rate | 4.0% | 4.5% |
Equity market risk premium | 5.3% | 6.3% |
Adjusted beta | 1.12 | 1.18 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 10.0% | 12.5% |
Tax rate | 17.2% | 19.6% |
Debt/Equity ratio | 0.46 | 0.46 |
Cost of debt | 4.0% | 5.2% |
After-tax WACC | 7.9% | 9.9% |
Selected WACC | 8.9% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
1347.HK | Hua Hong Semiconductor Ltd | 0.46 | 1.07 | 0.78 |
002049.SZ | Unigroup Guoxin Microelectronics Co Ltd | 0.04 | 1.59 | 1.54 |
002129.SZ | Tianjin Zhonghuan Semiconductor Ltd | 1.82 | 1.65 | 0.66 |
002459.SZ | JA Solar Technology Co Ltd | 1.26 | 1.47 | 0.73 |
600584.SS | JCET Group Co Ltd | 0.2 | 1.29 | 1.11 |
600703.SS | Sanan Optoelectronics Co Ltd | 0.23 | 1.28 | 1.07 |
601012.SS | LONGi Green Energy Technology Co Ltd | 0.38 | 1.56 | 1.19 |
603501.SS | Will Semiconductor Co Ltd Shanghai | 0.07 | 1.21 | 1.15 |
688008.SS | Montage Technology Co Ltd | 0 | 1.47 | 1.47 |
688599.SS | Trina Solar Co Ltd | 1.53 | 1.61 | 0.71 |
Low | High | |
Unlevered beta | 0.96 | 1.13 |
Relevered beta | 1.18 | 1.27 |
Adjusted relevered beta | 1.12 | 1.18 |
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 1347.HK:
cost_of_equity (11.25%) = risk_free_rate (4.25%) + equity_risk_premium (5.80%) * adjusted_beta (1.12) + 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.