The WACC of Meituan (3690.HK) is 9.1%.
Range | Selected | |
Cost of equity | 6.8% - 12.3% | 9.55% |
Tax rate | 1.1% - 3.0% | 2.05% |
Cost of debt | 4.0% - 4.5% | 4.25% |
WACC | 6.5% - 11.7% | 9.1% |
Category | Low | High |
Long-term bond rate | 2.9% | 3.4% |
Equity market risk premium | 6.0% | 7.0% |
Adjusted beta | 0.65 | 1.21 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.8% | 12.3% |
Tax rate | 1.1% | 3.0% |
Debt/Equity ratio | 0.09 | 0.09 |
Cost of debt | 4.0% | 4.5% |
After-tax WACC | 6.5% | 11.7% |
Selected WACC | 9.1% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
3690.HK | Meituan | 0.09 | 1.58 | 1.45 |
002280.SZ | Hangzhou Liaison Interactive Information Technology Co Ltd | 5.19 | 1.82 | 0.3 |
002640.SZ | Global Top E-Commerce Co Ltd | 0.11 | 1.95 | 1.76 |
136.HK | HengTen Networks Group Ltd | 0.04 | 0.34 | 0.32 |
1896.HK | Maoyan Entertainment | 0.06 | 1.19 | 1.12 |
2101.HK | Fulu Holdings Ltd | 0.32 | 0.16 | 0.12 |
3092.T | ZOZO Inc | 0.01 | 0.45 | 0.44 |
4385.T | Mercari Inc | 0.48 | 0.66 | 0.45 |
605136.SS | Shanghai Lili & Beauty Cosmetics Co Ltd | 0.02 | 1.36 | 1.33 |
9618.HK | JD.Com Inc | 0.18 | 1.58 | 1.35 |
Low | High | |
Unlevered beta | 0.44 | 1.2 |
Relevered beta | 0.48 | 1.31 |
Adjusted relevered beta | 0.65 | 1.21 |
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 3690.HK:
cost_of_equity (9.55%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.65) + 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.