CICC & CTAC Formula Version 2026.03.23 — PDD Case Study On Both Conservative EPV & ATC EPV Valuation
CICC & CTAC Formula Version 2026.03.23 — PDD Case Study On Both Conservative EPV & ATC EPV Valuation
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Formula Version 2026.03.23:
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(A)
CICC Factor ttm (applied to Invested Capital Case)
= Clean Invested Capital Cost Factor ttm
= Inflation Factor × ( 1 + D/E × (1 + 30Y Government Bond Yield Ratio × 2) )÷ (1 + D/E)
=
Adaptation: Inflation Factor is replaced by 30Y Government Bond Yield Factor
=
30Y Government Bond Yield Factor × ( 1 + D/E × (1 + 30Y Government Bond Yield Ratio × 2) )÷ (1 + D/E)
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(B)
CTAC Factor ttm (applied to Total Assets Case)
= Clean Total Assets Cost Factor ttm
= Inflation Factor × (1 + Total Liabilities/Total Equity × ( 1 + 30Y Government Bond Yield Ratio × 2) ) ÷ (1 + Total Liabilities/Total Equity)
=
Adaptation: Inflation Factor is replaced by 30Y Government Bond Yield Factor
=
30Y Government Bond Yield Factor × (1 + Total Liabilities/Total Equity × ( 1 + 30Y Government Bond Yield Ratio × 2) ) ÷ (1 + Total Liabilities/Total Equity)
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— Case Study —
PDD
Fin.2025.September.Q3.TTM
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30Y Government Bond Yield (USA, 2026.03.23)
= 4.919 %
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CICC Factor
= 1.04919×(1+0.027270204×(1+0.049192×2))÷(1+0.027270204)
= 1.0519302003
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CTAC Factor
= 1.04919×(1+0.5680113735×(1+0.049192×2))÷(1+0.5680113735)
= 1.086582667
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CICC Ratio
= CICC Factor - 1
= 1.0519302003 - 1
= 0.0519302003
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CTAC Ratio
= CTAC Factor - 1
= 1.086582667 - 1
= 0.086582667
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Geometric Mean Cost Factor
= √(1.0519302003×1.086582667)
= 1.0691160473
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Geometric Mean Cost Ratio
= Geometric Mean Cost Factor - 1
= 0.0691160473
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(A)
EPV TTM (Earning Power Value, Invested Capital Based)
= EPS TTM ÷ CICC
= 10.289979567÷0.0519302003
= USD 198.1501997409
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(B)
EPV TTM (Earning Power Value, Total Assets Based)
= EPS TTM ÷ CTAC
= 10.289979567÷0.086582667
= USD 118.8457219388
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(C)
Geometric Mean EPV TTM (Earning Power Value)
= EPS TTM ÷ Geometric Mean Cost Ratio
= 10.289979567÷0.0691160473
= USD 148.8797460065
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(D)
ATC EPV TTM (Invested Capital Based)
= EPS TTM ÷ CICC Factor × (1 - (1÷CICC Factor)^roic) ÷ (1 - 1÷CICC Factor)
= 10.289979567÷1.0519302003×(1-(1÷1.0519302003)^25.4354775147)÷(1-1÷1.0519302003)
= USD 143.4805096095
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(E)
ATC EPV TTM (Total Assets Based)
= EPS TTM ÷ CTAC Factor × (1 - (1÷CTAC Factor)^roa) ÷ (1 - 1÷CTAC Factor)
= 10.289979567÷1.086582667×(1-(1÷1.086582667)^16.6638511789)÷(1-1÷1.086582667)
= USD 89.0578916028
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(F)
Geometric Mean ATC EPV TTM
= EPS TTM ÷ Geometric Mean Cost Factor × (1 - (1÷Geometric Mean Cost Factor)^geometric_mean_roic_roa) ÷ (1 - 1÷Geometric Mean Cost Factor)
= 10.289979567÷1.0691160473×(1-(1÷1.0691160473)^√(25.4354775147×16.6638511789))÷(1-1÷1.0691160473)
= USD 111.2716785466
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(G)
Price (MOS: Factor In 4 Years Inflation Risk over Geometric Mean ATC EPV TTM)
= 111.2716785466÷1.0691160473^4
= USD 85.1697252542
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(H)
Price (MOS: Factor In 10 Years Inflation Risk over Geometric Mean ATC EPV TTM)
= 111.2716785466÷1.0691160473^10
= USD 57.0343053554
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(I)
Price (MOS: Factor In 14 Years Inflation Risk MOS over Geometric Mean ATC EPV TTM)
= 111.2716785466÷1.0691160473^14
= USD 43.6552785096
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Remark:
Earnings can be YoY positive or negative.
Assuming earning growth = 0% is one of the middle way in valuation, and this is the area in where EPV & ATC EPV are having strength.