H-Model DDM (ATC Mod) — PDD Case Study
Subject: H-Model DDM (ATC Mod) — PDD Case Study
.
(A)
H-Model DDM (Original, by Russell J. Fuller and Chi-Cheng Hsia)
=
D₀PS(1+g₂))/(r-g₂)
+
D₀PS*H*(g₁-g₂))/(r-g₂)
.
(B)
H-Model ATC Mod DDM
=
DₜₐₚPS × (1+0.025)/(r - 0.025)
-
DₜₐₚPS × (1+0.025)/(1+r) × (1 - [(1+0.025)/(1+r)]^(NetROIC-CICC)) ÷ (1 - (1+0.025)/(1+r))
+
DₜₐₚPS × (NetROIC-CICC)/2 × (g₁-0.025) ] ÷ (r-0.025)
=
DₜₐₚPS × 1.025 ÷ (CICC Ratio - 0.025)
-
DₜₐₚPS × (1+0.025)/(1+CICC Ratio) × (1 - [(1+0.025)/(1+CICC Ratio)]^(NetROIC-CICC)) ÷ (1 - (1+0.025)/(1+CICC Ratio))
+
DₜₐₚPS × (NetROIC - CICC)/2 × (g₁ - 0.025) ÷ (CICC Ratio - 0.025)
.
D₀PS
= The most recent actual distributed dividend payment (Original)
.
DₜₐₚPS
= Theoretical Affordable Payable Dividend Per Share (ATC Settings)
.
DₜₐₚPS ≠ D₀PS
.
g₁ = The initial high growth ratio
.
g₂
= The terminal growth ratio, typically 0.02 to 0.03 (2% to 3%)
= 0.025 standardized (ATC Settings)
.
r
= The discount ratio
= CICC Ratio (ATC Settings)
.
H
= The half-life of the high growth period
= Half of NetROIC Spread (ATC Settings)
= (NetROIC - CICC) ÷ 2
.
(C)
Case Study:
.
PDD
FY 2025
.
(I)
Non-Gaap EPS
= 10.3507581966
.
(II)
DₜₐₚPS (FY2025)
= 1÷(1+D/E) × EPS × CICC/NetROIC
= 1÷(1+0.0129638543)×10.3507581966×5.11587169÷25.5305840264
= USD 2.0475622232
.
(III)
FY2026 Forecast
.
Assumption :
.
DₜₐₚPS FY2026
= Theoretical Affordable Payable Dividend Per Share (ATC Settings)
= USD 2.0475622232 (remained the same)
.
g₁
= The initial high growth ratio for short term
= 0.16 (FY2026 Net Income Growth Forecasted 16% by Stock Analysts)
.
g₂
= The terminal growth ratio for perpetual term
= 2.5% (ATC Settings)
.
r
= The discount ratio
= CICC Ratio (ATC Settings)
= 0.0511587169
.
NetROIC
= 25.5305840264 FY 2025
= Assume 23.00 FY 2026
.
H
= The half-life of the high growth period
= Half of NetROIC Spread (ATC Settings)
= (NetROIC - CICC)/2
= (23.00 - 5.11587169)/2
.
CICC
= 5.11587169 FY 2025 ( Assume the same FY 2026)
.
(IV)
Forecast H-Model ATC Mod DDM FY2026 ✅
=
DₜₐₚPS × 1.025 ÷ (CICC Ratio - 0.025)
-
DₜₐₚPS × (1+0.025)/(1+CICC Ratio) × (1 - [(1+0.025)/(1+CICC Ratio)]^(NetROIC-CICC)) ÷ (1 - (1+0.025)/(1+CICC Ratio))
+
DₜₐₚPS × (NetROIC - CICC)/2 × (g₁ - 0.025) ÷ (CICC Ratio - 0.025)
=
2.0475622232 × 1.025 ÷ (0.0511587169 - 0.025)
-
2.0475622232 × (1+0.025)/(1+0.0511587169) × (1 - [(1+0.025)/(1+0.0511587169)]^(23.00-5.11587169)) ÷ (1 - (1+0.025)/(1+0.0511587169))
+
2.0475622232 × (23.00 - 5.11587169)/2 × (0.16 - 0.025) ÷ (0.0511587169 - 0.025)
= 80.2314305707 - 29.108830623 + 94.4913862638
= USD 145.6139862115 ✅
.
(V)
Forecast Theoretical Affordable Payable Dividend Yield FY2026 based on stock price USD 145.6139862115
= 100×(2.0475622232÷145.6139862115)
= 1.4061576614 %
.
(VI)
Forecast Theoretical Affordable Payable Dividend Payout FY2026
= 100×2.0475622232÷(10.3507581966×1.16)
= 17.0532420337 %
.
(VII)
Forecast Opportunity Cost (Unit: $ Per Dollar Opportunity) FY2026 at USD 145.6139862115
= Cost of Opportunity
= The Cost That You Have Paid For Buying a Dollar Worth Opportunity
= P/E Weight Ratio
= P/E ÷ ( Gnet_income÷CICC_Ratio×NetROIC÷CICC_Ratio )^(1÷4)
= Bought a dollar worth opportunity for $ Opportunity Cost
=
145.6139862115÷(10.3507581966×1.16)
÷
(16÷0.0511587169×23.00÷0.0511587169 )^(1÷4)
= 12.1275462216 ÷ 19.3643147417
= 0.626283263
= Bought a dollar worth opportunity for $ 0.626283263 Cost
.
(VIII)
Remark:
.
Due to the nature of assumption and future uncertainty, accuracy is not guaranteed.
.
Reference :