Is China Greenland Broad Greenstate Group (HKG:1253) Using Debt In A Risky Way?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, China Greenland Broad Greenstate Group Company Limited (HKG:1253) does carry debt. But should shareholders be worried about its use of debt?

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

When Is Debt A Problem?

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. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is China Greenland Broad Greenstate Group's Debt?

You can click the graphic below for the historical numbers, but it shows that China Greenland Broad Greenstate Group had CN¥701.4m of debt in June 2025, down from CN¥745.9m, one year before. However, because it has a cash reserve of CN¥95.9m, its net debt is less, at about CN¥605.5m.

How Healthy Is China Greenland Broad Greenstate Group's Balance Sheet?

According to the last reported balance sheet, China Greenland Broad Greenstate Group had liabilities of CN¥1.46b due within 12 months, and liabilities of CN¥453.2m due beyond 12 months. On the other hand, it had cash of CN¥95.9m and CN¥512.0m worth of receivables due within a year. So its liabilities total CN¥1.30b more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the CN¥119.1m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. At the end of the day, China Greenland Broad Greenstate Group would probably need a major re-capitalization if its creditors were to demand repayment. There's no doubt that we learn most about debt from the balance sheet. But it is China Greenland Broad Greenstate Group's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for China Greenland Broad Greenstate Group

Over 12 months, China Greenland Broad Greenstate Group made a loss at the EBIT level, and saw its revenue drop to CN¥22m, which is a fall of 13%. We would much prefer see growth.

Caveat Emptor

While China Greenland Broad Greenstate Group's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Indeed, it lost a very considerable CN¥155m at the EBIT level. Reflecting on this and the significant total liabilities, it's hard to know what to say about the stock because of our intense dis-affinity for it. Sure, the company might have a nice story about how they are going on to a brighter future. But the reality is that it is low on liquid assets relative to liabilities, and it lost CN¥170m in the last year. So we think buying this stock is risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example China Greenland Broad Greenstate Group has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.

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.