These 4 Measures Indicate That Zhejiang Xinan Chemical Industrial GroupLtd (SHSE:600596) Is Using Debt Safely
These 4 Measures Indicate That Zhejiang Xinan Chemical Industrial GroupLtd (SHSE:600596) Is Using Debt Safely
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 Zhejiang Xinan Chemical Industrial Group Co.,Ltd (SHSE:600596) does use debt in its business. But the real question is whether this debt is making the company risky.
When Is Debt A Problem?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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.
Check out our latest analysis for Zhejiang Xinan Chemical Industrial GroupLtd
What Is Zhejiang Xinan Chemical Industrial GroupLtd's Debt?
You can click the graphic below for the historical numbers, but it shows that as of September 2022 Zhejiang Xinan Chemical Industrial GroupLtd had CN¥2.54b of debt, an increase on CN¥2.41b, over one year. However, its balance sheet shows it holds CN¥4.19b in cash, so it actually has CN¥1.65b net cash.
SHSE:600596 Debt to Equity History December 8th 2022How Healthy Is Zhejiang Xinan Chemical Industrial GroupLtd's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Zhejiang Xinan Chemical Industrial GroupLtd had liabilities of CN¥5.71b due within 12 months and liabilities of CN¥1.70b due beyond that. Offsetting these obligations, it had cash of CN¥4.19b as well as receivables valued at CN¥3.40b due within 12 months. So it can boast CN¥174.2m more liquid assets than total liabilities.
This state of affairs indicates that Zhejiang Xinan Chemical Industrial GroupLtd's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the CN¥18.9b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, Zhejiang Xinan Chemical Industrial GroupLtd boasts net cash, so it's fair to say it does not have a heavy debt load!
Even more impressive was the fact that Zhejiang Xinan Chemical Industrial GroupLtd grew its EBIT by 105% over twelve months. If maintained that growth will make the debt even more manageable in the years ahead. 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 Zhejiang Xinan Chemical Industrial GroupLtd can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Zhejiang Xinan Chemical Industrial GroupLtd 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, Zhejiang Xinan Chemical Industrial GroupLtd recorded free cash flow worth 56% 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 it is always sensible to investigate a company's debt, in this case Zhejiang Xinan Chemical Industrial GroupLtd has CN¥1.65b in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 105% over the last year. So is Zhejiang Xinan Chemical Industrial GroupLtd's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Zhejiang Xinan Chemical Industrial GroupLtd you should know about.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
一些人説,作為投資者,考慮風險的最佳方式是波動性,而不是債務,但巴菲特曾説過一句名言:波動性遠非風險的同義詞。當我們考慮一家公司的風險有多大時,我們總是喜歡看它對債務的使用,因為債務過重可能導致破產。我們可以看到浙江新安化工集團有限公司(上海證券交易所:600596)確實在其業務中使用債務。但真正的問題是,這筆債務是否讓該公司面臨風險。
什麼時候債務是個問題?
當一家企業無法輕鬆履行這些義務時,債務和其他債務就會變得有風險,無論是通過自由現金流還是通過以有吸引力的價格籌集資本。資本主義的一部分是“創造性破壞”的過程,破產的企業被銀行家無情地清算。然而,一種更常見(但仍然昂貴)的情況是,一家公司必須以低廉的股價稀釋股東的股份,才能控制債務。當然,債務的好處是,它往往代表着廉價資本,特別是當它用能夠以高回報率進行再投資的能力取代公司的稀釋時。當考慮一家企業使用了多少債務時,首先要做的是把現金和債務放在一起看。
查看我們對浙江新安化工集團有限公司的最新分析
浙江新安化工集團有限公司的債務是什麼?
你可以點擊下圖查看歷史數據,但它顯示,截至2022年9月,浙江新安化工集團有限公司的債務為25.4億元,比一年前增加了24.1億元。然而,其資產負債表顯示,它持有人民幣41.9億元的現金,因此它實際上擁有人民幣16.5億元的淨現金。
上證綜指:600596債轉股歷史2022年12月8日浙江新安化工集團有限公司的資產負債表健康程度如何?
放大最新的資產負債表數據,浙江新安化工集團有限公司12個月內到期負債57.1億元,12個月後到期負債17.億元。作為對這些債務的抵銷,該公司有41.9億加元的現金以及價值34億加元的應收賬款在12個月內到期。因此,它的流動資產比總計負債。
這種情況表明,浙江新安化工集團有限公司的資產負債表看起來相當穩健,其總負債與流動資產大致相當。因此,儘管很難想象這家擁有189億元人民幣的公司正在為現金而苦苦掙扎,但我們仍然認為值得關注其資產負債表。簡而言之,浙江新安化工集團有限公司擁有淨現金,所以可以説它沒有沉重的債務負擔!
更令人印象深刻的是,浙江新安化工集團有限公司的息税前利潤在12個月內增長了105%。如果保持這樣的增長,未來幾年的債務將變得更加可控。當你分析債務時,資產負債表顯然是你關注的領域。但最終,該業務未來的盈利能力將決定浙江新安化工集團有限公司能否隨着時間的推移加強其資產負債表。所以,如果你關注未來,你可以看看這個免費顯示分析師利潤預測的報告。
最後,儘管税務人員可能喜歡會計利潤,但貸款人只接受冷硬現金。雖然浙江新安化工集團有限公司的資產負債表上有淨現金,但它將息税前利潤(EBIT)轉換為自由現金流的能力仍然值得一看,以幫助我們瞭解它正在以多快的速度建立(或侵蝕)現金餘額。最近三年,浙江新安化工集團有限公司錄得的自由現金流相當於其息税前利潤的56%,考慮到自由現金流不包括利息和税收,這一數字接近正常水平。這種冷酷的現金意味着,它可以在想要的時候減少債務。
總結
雖然調查一家公司的債務總是明智之舉,但在這起案件中,浙江新安化工集團有限公司擁有16.5億元人民幣的淨現金和體面的資產負債表。去年息税前利潤增長了105%,給我們留下了深刻的印象。那麼,浙江新安化工集團有限公司的債務是一種風險嗎?但在我們看來並非如此。當你分析債務時,資產負債表顯然是你關注的領域。然而,並非所有投資風險都存在於資產負債表中--遠非如此。這些風險可能很難發現。每家公司都有它們,我們已經發現浙江新安化工集團有限公司1個警示標誌你應該知道。
歸根結底,關注那些沒有淨債務的公司往往更好。你可以訪問我們的這類公司的特別名單(都有利潤增長的記錄)。這是免費的。
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本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。
譯文內容由第三人軟體翻譯。
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