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Is BrainAurora Medical Technology (HKG:6681) Using Too Much Debt?

Simply Wall St · 1d ago

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. Importantly, BrainAurora Medical Technology Limited (HKG:6681) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

What Is BrainAurora Medical Technology's Net Debt?

As you can see below, BrainAurora Medical Technology had CN¥413.6m of debt at June 2025, down from CN¥669.6m a year prior. However, because it has a cash reserve of CN¥396.9m, its net debt is less, at about CN¥16.6m.

debt-equity-history-analysis
SEHK:6681 Debt to Equity History December 18th 2025

A Look At BrainAurora Medical Technology's Liabilities

Zooming in on the latest balance sheet data, we can see that BrainAurora Medical Technology had liabilities of CN¥275.3m due within 12 months and liabilities of CN¥200.6m due beyond that. Offsetting this, it had CN¥396.9m in cash and CN¥171.8m in receivables that were due within 12 months. So it actually has CN¥92.8m more liquid assets than total liabilities.

Having regard to BrainAurora Medical Technology's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the CN¥6.66b company is struggling for cash, we still think it's worth monitoring its balance sheet. Carrying virtually no net debt, BrainAurora Medical Technology has a very light debt load indeed. 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 BrainAurora Medical Technology'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.

View our latest analysis for BrainAurora Medical Technology

Over 12 months, BrainAurora Medical Technology reported revenue of CN¥170m, which is a gain of 80%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Despite the top line growth, BrainAurora Medical Technology still had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at CN¥201m. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. Still, we'd be more encouraged to study the business in depth if it already had some free cash flow. This one is a bit too risky for our liking. 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. To that end, you should be aware of the 2 warning signs we've spotted with BrainAurora Medical Technology .

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.