Is Beijing Capital International Airport (HKG:694) Using Debt Sensibly?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Beijing Capital International Airport Company Limited (HKG:694) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Beijing Capital International Airport Carry?

The chart below, which you can click on for greater detail, shows that Beijing Capital International Airport had CN¥11.2b in debt in September 2025; about the same as the year before. However, it also had CN¥2.22b in cash, and so its net debt is CN¥8.96b.

How Strong Is Beijing Capital International Airport's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Beijing Capital International Airport had liabilities of CN¥15.8b due within 12 months and liabilities of CN¥1.94b due beyond that. On the other hand, it had cash of CN¥2.22b and CN¥1.33b worth of receivables due within a year. So it has liabilities totalling CN¥14.2b more than its cash and near-term receivables, combined.

When you consider that this deficiency exceeds the company's CN¥12.2b market capitalization, you might well be inclined to review the balance sheet intently. 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. 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 Beijing Capital International Airport'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.

Check out our latest analysis for Beijing Capital International Airport

In the last year Beijing Capital International Airport wasn't profitable at an EBIT level, but managed to grow its revenue by 2.7%, to CN¥5.6b. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months Beijing Capital International Airport produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at CN¥176m. 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. It's fair to say the loss of CN¥1.2b didn't encourage us either; we'd like to see a profit. In the meantime, we consider the stock to be risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for Beijing Capital International Airport you should be aware of.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.