Biosino Bio-Technology and Science Incorporation (HKG:8247) Has Debt But No Earnings; Should You Worry?

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.' 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, Biosino Bio-Technology and Science Incorporation (HKG:8247) does carry debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Biosino Bio-Technology and Science Incorporation Carry?

As you can see below, Biosino Bio-Technology and Science Incorporation had CN¥136.8m of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have CN¥46.3m in cash offsetting this, leading to net debt of about CN¥90.5m.

A Look At Biosino Bio-Technology and Science Incorporation's Liabilities

We can see from the most recent balance sheet that Biosino Bio-Technology and Science Incorporation had liabilities of CN¥272.7m falling due within a year, and liabilities of CN¥7.36m due beyond that. On the other hand, it had cash of CN¥46.3m and CN¥106.1m worth of receivables due within a year. So its liabilities total CN¥127.6m more than the combination of its cash and short-term receivables.

Given this deficit is actually higher than the company's market capitalization of CN¥125.8m, we think shareholders really should watch Biosino Bio-Technology and Science Incorporation's debt levels, like a parent watching their child ride a bike for the first time. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But it is Biosino Bio-Technology and Science Incorporation'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.

See our latest analysis for Biosino Bio-Technology and Science Incorporation

In the last year Biosino Bio-Technology and Science Incorporation had a loss before interest and tax, and actually shrunk its revenue by 21%, to CN¥225m. That makes us nervous, to say the least.

Caveat Emptor

Not only did Biosino Bio-Technology and Science Incorporation'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¥44m at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of CN¥47m. In the meantime, we consider the stock to be risky. 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. For example Biosino Bio-Technology and Science Incorporation has 2 warning signs (and 1 which is significant) we think you should know about.

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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.