We Think Zhejiang Zheneng Electric Power (SHSE:600023) Is Taking Some Risk With Its Debt
We Think Zhejiang Zheneng Electric Power (SHSE:600023) Is Taking Some Risk With Its Debt
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.' 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 note that Zhejiang Zheneng Electric Power Co., Ltd. (SHSE:600023) does have debt on its balance sheet. But should shareholders be worried about its use of debt?
傳奇基金經理李露(由查理·芒格支持)曾經說過:“最大的投資風險不是價格的波動,而是你是否會遭受永久的資本損失。”當我們思考一家公司的風險有多大時,我們總是喜歡考慮其債務的用途,因爲債務過載可能導致破產。我們注意到,浙江振能電力有限公司(SHSE: 600023)的資產負債表上確實有債務。但是,股東是否應該擔心其債務的使用?
When Is Debt A Problem?
債務何時會成爲問題?
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 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.
一般而言,只有當公司無法通過籌集資金或自己的現金流輕鬆還清債務時,債務才會成爲真正的問題。資本主義的重要組成部分是 “創造性破壞” 過程,在這種過程中,倒閉的企業被銀行家無情地清算。但是,更常見(但仍然昂貴)的情況是,公司必須以低廉的股價稀釋股東才能控制債務。當然,債務可以成爲企業的重要工具,尤其是資本密集型企業。考慮公司債務水平的第一步是將其現金和債務一起考慮。
What Is Zhejiang Zheneng Electric Power's Net Debt?
浙江振能電力的淨負債是多少?
You can click the graphic below for the historical numbers, but it shows that as of September 2023 Zhejiang Zheneng Electric Power had CN¥49.3b of debt, an increase on CN¥38.3b, over one year. However, because it has a cash reserve of CN¥19.8b, its net debt is less, at about CN¥29.5b.
你可以點擊下圖查看歷史數字,但它顯示,截至2023年9月,浙江振能電力在一年內有493億元人民幣的債務,比383億加元人民幣的債務有所增加。但是,由於其現金儲備爲198億元人民幣,其淨負債較少,約爲295億元人民幣。
How Healthy Is Zhejiang Zheneng Electric Power's Balance Sheet?
浙江振能電力的資產負債表有多健康?
The latest balance sheet data shows that Zhejiang Zheneng Electric Power had liabilities of CN¥31.5b due within a year, and liabilities of CN¥35.8b falling due after that. Offsetting these obligations, it had cash of CN¥19.8b as well as receivables valued at CN¥15.0b due within 12 months. So it has liabilities totalling CN¥32.5b more than its cash and near-term receivables, combined.
最新的資產負債表數據顯示,浙江振能電力有一年內到期315億元人民幣的負債,358億元人民幣的負債在此之後到期。除了這些債務外,它還有198億元人民幣的現金以及價值150億元人民幣的應收賬款將在12個月內到期。因此,它的負債總額比其現金和短期應收賬款的總和多出325億元人民幣。
Zhejiang Zheneng Electric Power has a very large market capitalization of CN¥77.1b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt.
浙江振能電力擁有非常大的市值,爲771億元人民幣,因此,如果需要,它很可能會籌集資金以改善其資產負債表。但是,仍然值得仔細研究其償還債務的能力。
In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its 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).
爲了擴大公司相對於收益的負債規模,我們計算其淨負債除以利息、稅項、折舊和攤銷前的收益(EBITDA),將其利息和稅前收益(EBIT)除以利息支出(利息保障)。這種方法的優勢在於,我們既考慮了債務的絕對數量(包括淨負債與息稅折舊攤銷前利潤),也考慮了與該債務相關的實際利息支出(及其利息覆蓋率)。
Zhejiang Zheneng Electric Power's net debt is 4.1 times its EBITDA, which is a significant but still reasonable amount of leverage. But its EBIT was about 1k times its interest expense, implying the company isn't really paying a high cost to maintain that level of debt. Even were the low cost to prove unsustainable, that is a good sign. We also note that Zhejiang Zheneng Electric Power improved its EBIT from a last year's loss to a positive CN¥1.5b. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Zhejiang Zheneng Electric Power's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
浙江振能電力的淨負債是其息稅折舊攤銷前利潤的4.1倍,這是一個可觀但仍然合理的槓桿率。但是其息稅前利潤約爲利息支出的1萬倍,這意味着該公司並沒有爲維持這一債務水平付出高昂的代價。即使事實證明低成本是不可持續的,這也是一個好兆頭。我們還注意到,浙江振能電力將其息稅前利潤從去年的虧損提高至正15億元人民幣。毫無疑問,我們從資產負債表中學到的關於債務的知識最多。但是,未來收益將決定浙江振能電力未來維持健康資產負債表的能力。因此,如果您專注於未來,可以查看這份顯示分析師利潤預測的免費報告。
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So it's worth checking how much of the earnings before interest and tax (EBIT) is backed by free cash flow. During the last year, Zhejiang Zheneng Electric Power burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.
但是我們最終的考慮因素也很重要,因爲公司無法用紙面利潤來償還債務;它需要冷硬現金。因此,值得檢查一下利息和稅前收益(EBIT)中有多少是由自由現金流支持的。去年,浙江振能電力燒掉了大量現金。儘管投資者無疑預計這種情況將在適當的時候逆轉,但這顯然意味着其使用債務的風險更大。
Our View
我們的觀點
Zhejiang Zheneng Electric Power's conversion of EBIT to free cash flow and net debt to EBITDA definitely weigh on it, in our esteem. But the good news is it seems to be able to cover its interest expense with its EBIT with ease. When we consider all the factors discussed, it seems to us that Zhejiang Zheneng Electric Power is taking some risks with its use of debt. So while that leverage does boost returns on equity, we wouldn't really want to see it increase from here. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Zhejiang Zheneng Electric Power's earnings per share history for free.
在我們看來,浙江振能電力將息稅前利潤轉換爲自由現金流,將淨負債轉換爲息稅折舊攤銷前利潤,這無疑給其帶來了壓力。但好消息是,它似乎能夠輕鬆地用息稅前利潤支付利息支出。當我們考慮所討論的所有因素時,在我們看來,浙江振能電力在使用債務方面正在冒一些風險。因此,儘管這種槓桿率確實提高了股本回報率,但我們真的不希望看到它從現在開始增加。除了大多數其他指標外,我們認爲追蹤每股收益的增長速度非常重要。如果你也意識到了這一點,那你很幸運,因爲今天你可以免費查看這張浙江振能電力每股收益歷史的互動圖表。
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.
歸根結底,通常最好將注意力集中在沒有淨負債的公司身上。您可以訪問我們的此類公司的特別名單(所有公司都有利潤增長記錄)。它是免費的。
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