LONGi Green Energy Technology Co., Ltd. (SHSE:601012) is a company that uses debt to fund growth, but the real question is whether this debt makes the company risky. Debt becomes a problem when a company can’t easily pay it off, potentially leading to bankruptcy or shareholder dilution. As of September 2024, LONGi Green Energy Technology had CN¥21.4b of debt, but also had CN¥51.1b in cash, resulting in net cash of CN¥29.8b.
The company’s liabilities include CN¥63.0b due within 12 months and CN¥28.9b due beyond 12 months. However, with a market capitalization of CN¥138.7b, these liabilities are likely manageable. Despite its significant liabilities, LONGi Green Energy Technology has net cash and does not have a heavy debt load.
In the past year, the company saw a loss at the EBIT level and a decrease in revenue by 31%. This, along with negative free cash outflow and accounting losses, suggests a risky situation. With only CN¥29.8b on the balance sheet, the company may need to raise capital soon.
While the balance sheet provides insight into debt levels, other factors like future earnings play a crucial role in assessing a company’s ability to maintain a healthy balance sheet. LONGi Green Energy Technology’s current situation suggests potential risk due to its financial performance. Investors should keep an eye on the company’s balance sheet strength and future earnings to make informed decisions.
Source
Photo credit simplywall.st
