We Think Junjin Construction and RobotLtd (KRX:079900) Can Manage Its Debt With Ease

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.' 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. Importantly, Junjin Construction and Robot Co.,Ltd. (KRX:079900) does carry debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth 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 Junjin Construction and RobotLtd's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Junjin Construction and RobotLtd had debt of ₩29.3b, up from ₩19.0b in one year. But on the other hand it also has ₩51.0b in cash, leading to a ₩21.7b net cash position.

How Healthy Is Junjin Construction and RobotLtd's Balance Sheet?

We can see from the most recent balance sheet that Junjin Construction and RobotLtd had liabilities of ₩60.1b falling due within a year, and liabilities of ₩1.43b due beyond that. Offsetting this, it had ₩51.0b in cash and ₩50.5b in receivables that were due within 12 months. So it actually has ₩40.0b more liquid assets than total liabilities.

This surplus suggests that Junjin Construction and RobotLtd has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Junjin Construction and RobotLtd boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Junjin Construction and RobotLtd

On the other hand, Junjin Construction and RobotLtd saw its EBIT drop by 3.5% in the last twelve months. That sort of decline, if sustained, will obviously make debt harder to handle. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Junjin Construction and RobotLtd'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Junjin Construction and RobotLtd 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. Over the most recent three years, Junjin Construction and RobotLtd recorded free cash flow worth 78% 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

While we empathize with investors who find debt concerning, you should keep in mind that Junjin Construction and RobotLtd has net cash of ₩21.7b, as well as more liquid assets than liabilities. The cherry on top was that in converted 78% of that EBIT to free cash flow, bringing in ₩24b. So we don't think Junjin Construction and RobotLtd's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in Junjin Construction and RobotLtd, you may well want to click here to check an interactive graph of its earnings per share history.

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.