688555.SS WACC - Weighted Average Cost of Capital

The WACC of Essence Information Technology Co Ltd (688555.SS) is 11.7%.

The Cost of Equity of Essence Information Technology Co Ltd (688555.SS) is 21.65%.

The Cost of Debt of Essence Information Technology Co Ltd (688555.SS) is 5.00%.

	Range	Selected
Cost of equity	18.90% - 24.40%	21.65%
Tax rate	11.30% - 12.10%	11.70%
Cost of debt	5.00% - 5.00%	5.00%
WACC	10.5% - 12.8%	11.7%

WACC

688555.SS WACC calculation

Category	Low	High

Long-term bond rate	2.7%	3.2%
Equity market risk premium	6.1%	7.1%
Adjusted beta	2.64	2.91

Additional risk adjustments	0.0%	0.5%
Cost of equity	18.90%	24.40%

Tax rate	11.30%	12.10%
Debt/Equity ratio	1.37	1.37
Cost of debt	5.00%	5.00%

After-tax WACC	10.5%	12.8%


Selected WACC	11.7%

688555.SS'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 688555.SS:

cost_of_equity (21.65%) = risk_free_rate (2.95%) + equity_risk_premium (6.60%) * adjusted_beta (2.64) + 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.