Is Xinte Energy (HKG:1799) Using Debt Sensibly?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. We note that Xinte Energy Co., Ltd. (HKG:1799) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Xinte Energy's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Xinte Energy had debt of CN¥25.4b, up from CN¥22.5b in one year. However, it also had CN¥12.0b in cash, and so its net debt is CN¥13.4b.

How Strong Is Xinte Energy's Balance Sheet?

The latest balance sheet data shows that Xinte Energy had liabilities of CN¥25.5b due within a year, and liabilities of CN¥21.4b falling due after that. Offsetting this, it had CN¥12.0b in cash and CN¥8.59b in receivables that were due within 12 months. So its liabilities total CN¥26.2b more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the CN¥10.7b company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Xinte Energy would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Xinte Energy's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Xinte Energy

Over 12 months, Xinte Energy made a loss at the EBIT level, and saw its revenue drop to CN¥17b, which is a fall of 33%. That makes us nervous, to say the least.

Caveat Emptor

Not only did Xinte Energy's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable CN¥2.7b at the EBIT level. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. For example, we would not want to see a repeat of last year's loss of CN¥3.3b. And until that time we think this is a risky stock. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Xinte Energy's profit, revenue, and operating cashflow have changed over the last few years.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.