Haina Intelligent Equipment International Holdings (HKG:1645) Is Making Moderate Use Of Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Haina Intelligent Equipment International Holdings Limited (HKG:1645) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

What Is Haina Intelligent Equipment International Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Haina Intelligent Equipment International Holdings had CN¥308.7m of debt, an increase on CN¥212.7m, over one year. However, it does have CN¥35.2m in cash offsetting this, leading to net debt of about CN¥273.6m.

A Look At Haina Intelligent Equipment International Holdings' Liabilities

The latest balance sheet data shows that Haina Intelligent Equipment International Holdings had liabilities of CN¥648.1m due within a year, and liabilities of CN¥6.71m falling due after that. Offsetting this, it had CN¥35.2m in cash and CN¥147.1m in receivables that were due within 12 months. So it has liabilities totalling CN¥472.6m more than its cash and near-term receivables, combined.

This deficit is considerable relative to its market capitalization of CN¥619.2m, so it does suggest shareholders should keep an eye on Haina Intelligent Equipment International Holdings' use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. When analysing debt levels, the balance sheet is the obvious place to start. But it is Haina Intelligent Equipment International Holdings's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for Haina Intelligent Equipment International Holdings

In the last year Haina Intelligent Equipment International Holdings had a loss before interest and tax, and actually shrunk its revenue by 2.6%, to CN¥411m. That's not what we would hope to see.

Caveat Emptor

Importantly, Haina Intelligent Equipment International Holdings had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at CN¥22m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled CN¥236m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 3 warning signs we've spotted with Haina Intelligent Equipment International Holdings (including 2 which are a bit unpleasant) .

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.