Is JD Logistics (HKG:2618) A Risky Investment?

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.' 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. As with many other companies JD Logistics, Inc. (HKG:2618) makes use of debt. But the real question is whether this debt is making the company risky.

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is JD Logistics's Net Debt?

The image below, which you can click on for greater detail, shows that JD Logistics had debt of CN¥5.98b at the end of June 2025, a reduction from CN¥7.83b over a year. But on the other hand it also has CN¥31.2b in cash, leading to a CN¥25.2b net cash position.

How Healthy Is JD Logistics' Balance Sheet?

We can see from the most recent balance sheet that JD Logistics had liabilities of CN¥39.8b falling due within a year, and liabilities of CN¥20.0b due beyond that. Offsetting this, it had CN¥31.2b in cash and CN¥18.1b in receivables that were due within 12 months. So its liabilities total CN¥10.5b more than the combination of its cash and short-term receivables.

Of course, JD Logistics has a titanic market capitalization of CN¥73.9b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, JD Logistics also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for JD Logistics

In addition to that, we're happy to report that JD Logistics has boosted its EBIT by 55%, thus reducing the spectre of future debt repayments. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if JD Logistics can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. JD Logistics 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, JD Logistics actually produced more free cash flow than EBIT over the last two years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

Although JD Logistics's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of CN¥25.2b. And it impressed us with free cash flow of CN¥14b, being 294% of its EBIT. So is JD Logistics's debt a risk? It doesn't seem so to us. We'd be very excited to see if JD Logistics insiders have been snapping up shares. If you are too, then click on this link right now to take a (free) peek at our list of reported insider transactions.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.