We Think HD Hyundai Electric (KRX:267260) Can Manage Its Debt With Ease

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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, HD Hyundai Electric Co., Ltd. (KRX:267260) does carry debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.

What Is HD Hyundai Electric's Debt?

You can click the graphic below for the historical numbers, but it shows that HD Hyundai Electric had ₩291.7b of debt in March 2025, down from ₩567.1b, one year before. However, it does have ₩822.8b in cash offsetting this, leading to net cash of ₩531.1b.

How Healthy Is HD Hyundai Electric's Balance Sheet?

We can see from the most recent balance sheet that HD Hyundai Electric had liabilities of ₩2.42t falling due within a year, and liabilities of ₩305.4b due beyond that. Offsetting these obligations, it had cash of ₩822.8b as well as receivables valued at ₩922.5b due within 12 months. So its liabilities total ₩982.8b more than the combination of its cash and short-term receivables.

Since publicly traded HD Hyundai Electric shares are worth a very impressive total of ₩15t, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, HD Hyundai Electric also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for HD Hyundai Electric

On top of that, HD Hyundai Electric grew its EBIT by 92% over the last twelve months, and that growth will make it easier to handle its debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if HD Hyundai Electric 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, a company can only pay off debt with cold hard cash, not accounting profits. HD Hyundai Electric 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, HD Hyundai Electric recorded free cash flow worth 68% 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 look at a company's total liabilities, it is very reassuring that HD Hyundai Electric has ₩531.1b in net cash. And it impressed us with its EBIT growth of 92% over the last year. So we don't think HD Hyundai Electric's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for HD Hyundai Electric that you should be aware of before investing here.

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.