196.HK WACC - Weighted Average Cost of Capital
The WACC of Honghua Group Ltd (196.HK) is 13.1%.
| Range | Selected | |
| Cost of equity | 11.3% - 20.7% | 16% |
| Tax rate | 1.8% - 13.3% | 7.55% |
| Cost of debt | 4.1% - 22.9% | 13.5% |
| WACC | 6.2% - 20.1% | 13.1% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.41 | 2.41 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 11.3% | 20.7% |
| Tax rate | 1.8% | 13.3% |
| Debt/Equity ratio | 2.37 | 2.37 |
| Cost of debt | 4.1% | 22.9% |
| After-tax WACC | 6.2% | 20.1% |
| Selected WACC | 13.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| 196.HK | Honghua Group Ltd | 2.37 | 1.78 | 0.54 |
| 000852.SZ | Sinopec Oilfield Equipment Corp | 0.43 | 0.56 | 0.4 |
| 002443.SZ | Zhejiang Kingland Pipeline and Technologies Co Ltd | 0.03 | 0.73 | 0.71 |
| 002490.SZ | Shandong Molong Petroleum Machinery Co Ltd | 0.31 | 0.53 | 0.41 |
| 1623.HK | Hilong Holding Ltd | 15.51 | 0.62 | 0.04 |
| 1921.HK | Dalipal Holdings Ltd | 0.3 | 0.15 | 0.11 |
| 300157.SZ | LandOcean Energy Services Co Ltd | 0.09 | 1.56 | 1.43 |
| 300471.SZ | Houpu Clean Energy Co Ltd | 0.04 | 1.33 | 1.27 |
| 603800.SS | Suzhou Douson Drilling&Production Equipment Co Ltd | 0.17 | 1.54 | 1.32 |
| 688377.SS | Nanjing Develop Advanced Manufacturing Co Ltd | 0.11 | 1.74 | 1.57 |
| Low | High | |
| Unlevered beta | 0.49 | 0.93 |
| Relevered beta | 1.61 | 3.1 |
| Adjusted relevered beta | 1.41 | 2.41 |
196.HK'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 196.HK:
cost_of_equity (16.00%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (1.41) + 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.