0005.HK
HSBC HOLDINGSClosed0005.HK discounted cash flow valuation
HSBC HOLDINGS is a banks - diversified company. Its cash flows include lending and deposits, so free cash flow isn't owner earnings and this model can mislead. Compare it with peers on book value and earnings instead.
0005.HK Fair Value
Reverse DCF: no growth rate between −50% and +100% a year matches today's price.
Model: 6.4% from analyst next-year EPS & revenue growth. Fades linearly to terminal growth by year 10.
Model: 6.46% (CAPM, see the build-up).
Long-run growth after year 10; keep it at or below nominal GDP.
Value Bridge
| PV of free cash flow, years 1–10 | HKD 1.92T |
|---|---|
| PV of terminal value (70% of EV) | HKD 4.54T |
| Enterprise value | HKD 6.45T |
| + Cash & investments | HKD 9.57T |
| − Total debt | −HKD 6.57T |
| Equity value | HKD 9.45T |
| ÷ Shares outstanding | 17.10B |
| Value per share | HKD 552.62 |
| Market cap | HKD 2.53T |
USD statements converted at 7.848 HKD.
Discount Rate Build-up
| Risk-free rate (10-yr Treasury) | 5.22% |
|---|---|
| Beta (clamped 0.5–2.5) | 0.58 |
| Equity risk premium | 5.00% |
| Cost of equity (CAPM) | 8.12% |
| Pre-tax cost of debt | 7.53% |
| Tax rate | 22.7% |
| Debt / (equity + debt) | 72.2% |
| WACC | 6.46% |
Cost of debt is interest expense ÷ total debt, held between the risk-free rate and 12%.
Free Cash Flow: History and Projection
Sensitivity: Value per Share
| WACC ↓ / g → | 1.50% | 2.00% | 2.50% | 3.00% | 3.50% |
|---|---|---|---|---|---|
| 4.46% | 711.43 | 805.48 | 947.51 | 1,186.78 | 1,675.26 |
| 5.46% | 572.89 | 620.11 | 683.27 | 772.09 | 906.21 |
| 6.46% | 490.36 | 518.00 | 552.62 | 597.24 | 656.92 |
| 7.46% | 435.62 | 453.40 | 474.76 | 500.90 | 533.63 |
| 8.46% | 396.69 | 408.87 | 423.09 | 439.91 | 460.12 |
Green is above today's price, red below (full colour at ±30%). The outlined centre cell is the current inputs.
Projected Cash Flows
| Year | Growth | Free cash flow | Discount factor | Present value |
|---|---|---|---|---|
| Base (FY2025) | — | HKD 197.02B | — | — |
| Year 1 | 6.4% | HKD 209.63B | 0.939 | HKD 196.91B |
| Year 2 | 6.4% | HKD 223.04B | 0.882 | HKD 196.80B |
| Year 3 | 6.4% | HKD 237.32B | 0.829 | HKD 196.69B |
| Year 4 | 6.4% | HKD 252.51B | 0.778 | HKD 196.58B |
| Year 5 | 6.4% | HKD 268.67B | 0.731 | HKD 196.46B |
| Year 6 | 5.6% | HKD 283.77B | 0.687 | HKD 194.91B |
| Year 7 | 4.8% | HKD 297.50B | 0.645 | HKD 191.95B |
| Year 8 | 4.1% | HKD 309.58B | 0.606 | HKD 187.62B |
| Year 9 | 3.3% | HKD 319.73B | 0.569 | HKD 182.02B |
| Year 10 | 2.5% | HKD 327.73B | 0.535 | HKD 175.25B |
Method
Two-stage free-cash-flow model, the same as the bot's lgf dcf: five years at the chosen growth rate, a straight-line fade to terminal growth by year ten, then a Gordon-growth terminal value. Everything is discounted at WACC.
Base cash flow is the trailing four quarters of operating cash flow minus capital expenditure (the latest fiscal year when quarters are missing). Default growth uses analyst long-term growth when Yahoo publishes it, else the average of next year's EPS and revenue growth, else revenue CAGR, held between −5% and 25%.
A DCF is only as good as its inputs. The terminal value is usually most of the answer, so read the sensitivity grid before the headline number. This is a model, not investment advice.