We Think Huiyuan Cowins Technology Group (HKG:1116) Has A Fair Chunk Of Debt

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 Huiyuan Cowins Technology Group Limited (HKG:1116) does have debt on its balance sheet. But is this debt a concern to shareholders?

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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. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Huiyuan Cowins Technology Group's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Huiyuan Cowins Technology Group had CN¥159.6m of debt, an increase on CN¥100.0m, over one year. However, it does have CN¥51.6m in cash offsetting this, leading to net debt of about CN¥107.9m.

A Look At Huiyuan Cowins Technology Group's Liabilities

Zooming in on the latest balance sheet data, we can see that Huiyuan Cowins Technology Group had liabilities of CN¥282.6m due within 12 months and liabilities of CN¥1.78m due beyond that. On the other hand, it had cash of CN¥51.6m and CN¥305.7m worth of receivables due within a year. So it actually has CN¥73.0m more liquid assets than total liabilities.

This short term liquidity is a sign that Huiyuan Cowins Technology Group could probably pay off its debt with ease, as its balance sheet is far from stretched. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Huiyuan Cowins Technology Group will need earnings to service that debt. 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 Huiyuan Cowins Technology Group

In the last year Huiyuan Cowins Technology Group wasn't profitable at an EBIT level, but managed to grow its revenue by 6.4%, to CN¥760m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months Huiyuan Cowins Technology Group produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at CN¥48m. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. But we'd be more likely to spend time trying to understand the stock if the company made a profit. So it seems too risky for our taste. 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. To that end, you should learn about the 2 warning signs we've spotted with Huiyuan Cowins Technology Group (including 1 which can't be ignored) .

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.