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These 4 Measures Indicate That Haitian International Holdings (HKG:1882) Is Using Debt Reasonably Well

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. As with many other companies Haitian International Holdings Limited (HKG:1882) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Haitian International Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Haitian International Holdings had CN¥2.34b of debt, an increase on CN¥2.12b, over one year. But on the other hand it also has CN¥8.62b in cash, leading to a CN¥6.28b net cash position.

debt-equity-history-analysis
SEHK:1882 Debt to Equity History December 23rd 2025

A Look At Haitian International Holdings' Liabilities

According to the last reported balance sheet, Haitian International Holdings had liabilities of CN¥11.4b due within 12 months, and liabilities of CN¥621.1m due beyond 12 months. Offsetting these obligations, it had cash of CN¥8.62b as well as receivables valued at CN¥5.12b due within 12 months. So it can boast CN¥1.73b more liquid assets than total liabilities.

This short term liquidity is a sign that Haitian International Holdings could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Haitian International Holdings has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Haitian International Holdings

And we also note warmly that Haitian International Holdings grew its EBIT by 16% last year, making its debt load easier to handle. 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 Haitian International Holdings'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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Haitian International Holdings 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. Looking at the most recent three years, Haitian International Holdings recorded free cash flow of 30% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Haitian International Holdings has net cash of CN¥6.28b, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 16% over the last year. So we don't think Haitian International Holdings's use of debt is risky. 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. Be aware that Haitian International Holdings is showing 1 warning sign in our investment analysis , 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.