We Think Texwinca Holdings (HKG:321) Can Manage Its Debt With Ease

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. Importantly, Texwinca Holdings Limited (HKG:321) does carry debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Texwinca Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Texwinca Holdings had HK$535.9m of debt in September 2025, down from HK$1.82b, one year before. But it also has HK$1.61b in cash to offset that, meaning it has HK$1.07b net cash.

How Strong Is Texwinca Holdings' Balance Sheet?

We can see from the most recent balance sheet that Texwinca Holdings had liabilities of HK$1.29b falling due within a year, and liabilities of HK$556.6m due beyond that. Offsetting these obligations, it had cash of HK$1.61b as well as receivables valued at HK$987.2m due within 12 months. So it can boast HK$755.3m more liquid assets than total liabilities.

This surplus strongly suggests that Texwinca Holdings has a rock-solid balance sheet (and the debt is of no concern whatsoever). On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Texwinca Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Texwinca Holdings

It was also good to see that despite losing money on the EBIT line last year, Texwinca Holdings turned things around in the last 12 months, delivering and EBIT of HK$54m. There's no doubt that we learn most about debt from the balance sheet. But it is Texwinca 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Texwinca Holdings may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, Texwinca Holdings actually produced more free cash flow than EBIT over the last year. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While it is always sensible to investigate a company's debt, in this case Texwinca Holdings has HK$1.07b in net cash and a decent-looking balance sheet. The cherry on top was that in converted 994% of that EBIT to free cash flow, bringing in HK$534m. So is Texwinca Holdings's debt a risk? It doesn't seem so to us. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Texwinca Holdings has 2 warning signs (and 1 which doesn'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.

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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.