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HK Equities · Finance research note

HKEX 4338 - Microsoft Corporation

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2. Company Fundamentals

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.) N/A
Risk / Std Dev (Ann.) N/A

Price Snapshot:

Metric Value
Last Price N/A
Day Change N/A (N/A%)

DuPont Model Analysis

The DuPont model decomposes return on equity (ROE) into three operating and capital-structure drivers:

ROE = Net Margin × Asset Turnover × Equity Multiplier

The comparison uses the latest two comparable annual periods available for the issuer, with reported statement amounts shown in HK$. Revenue and net income are income-statement flows; total assets and shareholders’ equity are year-end balance-sheet figures. This is a simplified year-end-balance DuPont comparison rather than an average-balance ROE calculation.

DuPont component Calculation FY2026 FY2025
Revenue Reported revenue HK$331.84B HK$281.72B
Net income Reported net income HK$133.75B HK$101.83B
Total assets Year-end reported balance HK$758.38B HK$619.00B
Shareholders’ equity Year-end reported balance HK$442.39B HK$343.48B
Net margin Net income ÷ revenue 40.31% 36.15%
Asset turnover Revenue ÷ total assets 0.4376x 0.4551x
Equity multiplier Total assets ÷ shareholders’ equity 1.7143x 1.8022x
ROE Net margin × asset turnover × equity multiplier 30.23% 29.65%

Source: Yahoo Finance annual statements. Values are based on the two latest comparable annual periods returned by the source; fiscal period labels use the statement period-end year.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue HK$331.84B
Prior annual revenue HK$281.72B
EBIT HK$168.99B
Tax rate 19.40%
NOPAT = EBIT × (1 − tax rate) HK$136.20B
Forecast start-growth basis 15.00%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT HK$136.20B
Add: depreciation & amortisation HK$38.53B
Less: capital expenditure -HK$115.95B
Less/(add): working-capital cash-flow movement -HK$4.89B
Current unlevered FCFF HK$53.89B

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 15.00% HK$156.63B HK$44.31B -HK$133.34B -HK$5.63B HK$61.98B HK$59.04B
2 11.88% HK$175.23B HK$49.58B -HK$124.27B -HK$6.30B HK$94.24B HK$81.46B
3 8.75% HK$190.57B HK$53.91B -HK$108.07B -HK$6.85B HK$129.56B HK$101.63B
4 5.62% HK$201.28B HK$56.95B -HK$85.55B -HK$7.23B HK$165.45B HK$117.77B
5 2.50% HK$206.32B HK$58.37B -HK$58.37B -HK$7.41B HK$198.90B HK$128.47B

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 1.00
Cost of equity 10.21%
Pre-tax cost of debt 5.20%
WACC 10.20%
WACC validation within standard range

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value HK$2,647.66B
Implied terminal EV / EBITDA 8.42x
Terminal value as % of enterprise value 76.94%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF HK$488.37B
Present value of terminal value HK$1,629.11B
Indicated enterprise value HK$2,117.48B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value HK$2,117.48B
Less: gross interest-bearing debt HK$56.83B
Add: cash and equivalents HK$76.65B
Add: affiliate investments HK$0.00
Less: minority interests HK$0.00
Indicated common equity value HK$2,137.31B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 7,434,880,000.00
Share-count basis reported shares outstanding; option/RSU dilution data not separately available
Current market price HK$1,600.00
DCF indicative value per share HK$287.47
Indicative value vs. market price -82.03%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range pass
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 3/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:09:27.898954 UTC; latest reported fiscal period: 2026-06-30 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

2.7 Quantitative Factor Diagnostics

Factor-model exception: No verified adjusted-close issuer series is available for factor regression. No Fama–French loading or alpha estimate is published on an incomplete basis.

Factor models are descriptive in-sample exposure diagnostics, not forecasts, investment recommendations, or estimates of future returns. This is research and analysis only, not personalized financial advice.

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