Here's Why D.I (KRX:003160) Has A Meaningful Debt Burden

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies D.I Corporation (KRX:003160) makes use of debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is D.I's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 D.I had debt of ₩111.1b, up from ₩90.7b in one year. On the flip side, it has ₩59.1b in cash leading to net debt of about ₩51.9b.

A Look At D.I's Liabilities

The latest balance sheet data shows that D.I had liabilities of ₩158.9b due within a year, and liabilities of ₩42.5b falling due after that. Offsetting this, it had ₩59.1b in cash and ₩37.2b in receivables that were due within 12 months. So it has liabilities totalling ₩105.1b more than its cash and near-term receivables, combined.

Given D.I has a market capitalization of ₩577.6b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse.

View our latest analysis for D.I

We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).

D.I's net debt to EBITDA ratio of about 1.6 suggests only moderate use of debt. And its strong interest cover of 11.4 times, makes us even more comfortable. It was also good to see that despite losing money on the EBIT line last year, D.I turned things around in the last 12 months, delivering and EBIT of ₩26b. 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 D.I 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So it is important to check how much of its earnings before interest and tax (EBIT) converts to actual free cash flow. During the last year, D.I burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky.

Our View

D.I's conversion of EBIT to free cash flow was a real negative on this analysis, although the other factors we considered cast it in a significantly better light. For example its interest cover was refreshing. We think that D.I's debt does make it a bit risky, after considering the aforementioned data points together. Not all risk is bad, as it can boost share price returns if it pays off, but this debt risk is worth keeping in mind. 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. For instance, we've identified 1 warning sign for D.I that you should be aware of.

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.