The WACC of Hongfa Technology Co Ltd (600885.SS) is 9.3%.
Range | Selected | |
Cost of equity | 8.6% - 11.3% | 9.95% |
Tax rate | 11.1% - 12.2% | 11.65% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 8.1% - 10.5% | 9.3% |
Category | Low | High |
Long-term bond rate | 2.7% | 3.2% |
Equity market risk premium | 6.1% | 7.1% |
Adjusted beta | 0.96 | 1.07 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.6% | 11.3% |
Tax rate | 11.1% | 12.2% |
Debt/Equity ratio | 0.14 | 0.14 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 8.1% | 10.5% |
Selected WACC | 9.3% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
600885.SS | Hongfa Technology Co Ltd | 0.14 | 0.81 | 0.72 |
002028.SZ | Sieyuan Electric Co Ltd | 0.05 | 0.31 | 0.29 |
002074.SZ | Guoxuan High-tech Co Ltd | 0.99 | 1.31 | 0.7 |
300001.SZ | Qingdao TGOOD Electric Co Ltd | 0.31 | 1.2 | 0.94 |
600416.SS | Xiangtan Electric Manufacturing Co Ltd | 0.23 | 1.4 | 1.16 |
600516.SS | FangDa Carbon New Material Co Ltd | 0.08 | 1.13 | 1.06 |
600517.SS | State Grid Yingda Co Ltd | 0.29 | 1.15 | 0.92 |
688005.SS | Ningbo Ronbay New Energy Technology Co Ltd | 0.73 | 2.02 | 1.23 |
688408.SS | Arctech Solar Holding Co Ltd | 0.35 | 0.72 | 0.55 |
688567.SS | Farasis Energy Gan Zhou Co Ltd | 0.63 | 1.78 | 1.14 |
Low | High | |
Unlevered beta | 0.84 | 0.99 |
Relevered beta | 0.94 | 1.1 |
Adjusted relevered beta | 0.96 | 1.07 |
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 600885.SS:
cost_of_equity (9.95%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (0.96) + 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.