Is Raily Aesthetic Medicine International Holdings (HKG:2135) Weighed On By Its Debt Load?

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Raily Aesthetic Medicine International Holdings Limited (HKG:2135) does carry debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Raily Aesthetic Medicine International Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Raily Aesthetic Medicine International Holdings had CN¥25.7m of debt, an increase on CN¥15.0m, over one year. But on the other hand it also has CN¥35.7m in cash, leading to a CN¥10.1m net cash position.

How Healthy Is Raily Aesthetic Medicine International Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Raily Aesthetic Medicine International Holdings had liabilities of CN¥130.3m due within 12 months and liabilities of CN¥22.3m due beyond that. Offsetting these obligations, it had cash of CN¥35.7m as well as receivables valued at CN¥716.0k due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CN¥116.1m.

The deficiency here weighs heavily on the CN¥68.7m 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. After all, Raily Aesthetic Medicine International Holdings would likely require a major re-capitalisation if it had to pay its creditors today. Raily Aesthetic Medicine International Holdings boasts net cash, so it's fair to say it does not have a heavy debt load, even if it does have very significant liabilities, in total. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Raily Aesthetic Medicine International Holdings'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.

Check out our latest analysis for Raily Aesthetic Medicine International Holdings

Over 12 months, Raily Aesthetic Medicine International Holdings made a loss at the EBIT level, and saw its revenue drop to CN¥166m, which is a fall of 20%. To be frank that doesn't bode well.

So How Risky Is Raily Aesthetic Medicine International Holdings?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Raily Aesthetic Medicine International Holdings had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through CN¥19m of cash and made a loss of CN¥65m. However, it has net cash of CN¥10.1m, so it has a bit of time before it will need more capital. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 2 warning signs we've spotted with Raily Aesthetic Medicine International Holdings .

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.