We Think Qinhuangdao Port (HKG:3369) Can Manage Its Debt With Ease

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. We can see that Qinhuangdao Port Co., Ltd. (HKG:3369) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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. If things get really bad, the lenders can take control of the business. 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. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Qinhuangdao Port Carry?

As you can see below, Qinhuangdao Port had CN¥4.38b of debt at September 2025, down from CN¥5.63b a year prior. However, its balance sheet shows it holds CN¥5.25b in cash, so it actually has CN¥871.5m net cash.

How Strong Is Qinhuangdao Port's Balance Sheet?

We can see from the most recent balance sheet that Qinhuangdao Port had liabilities of CN¥2.71b falling due within a year, and liabilities of CN¥4.12b due beyond that. Offsetting these obligations, it had cash of CN¥5.25b as well as receivables valued at CN¥542.6m due within 12 months. So it has liabilities totalling CN¥1.03b more than its cash and near-term receivables, combined.

Given Qinhuangdao Port has a market capitalization of CN¥19.0b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Qinhuangdao Port boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Qinhuangdao Port

Also good is that Qinhuangdao Port grew its EBIT at 14% over the last year, further increasing its ability to manage debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Qinhuangdao Port's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Qinhuangdao Port has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the most recent three years, Qinhuangdao Port recorded free cash flow worth 80% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

We could understand if investors are concerned about Qinhuangdao Port's liabilities, but we can be reassured by the fact it has has net cash of CN¥871.5m. The cherry on top was that in converted 80% of that EBIT to free cash flow, bringing in CN¥1.3b. So is Qinhuangdao Port'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, we've discovered 1 warning sign for Qinhuangdao Port that you should be aware of before investing here.

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.