Jintai Energy Holdings (HKG:2728) Has A Pretty Healthy Balance Sheet

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. Importantly, Jintai Energy Holdings Limited (HKG:2728) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Jintai Energy Holdings's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Jintai Energy Holdings had HK$165.8m of debt, an increase on HK$154.8m, over one year. But on the other hand it also has HK$291.9m in cash, leading to a HK$126.2m net cash position.

How Strong Is Jintai Energy Holdings' Balance Sheet?

We can see from the most recent balance sheet that Jintai Energy Holdings had liabilities of HK$271.4m falling due within a year, and liabilities of HK$1.09m due beyond that. Offsetting this, it had HK$291.9m in cash and HK$8.13m in receivables that were due within 12 months. So it can boast HK$27.5m more liquid assets than total liabilities.

This surplus suggests that Jintai Energy Holdings is using debt in a way that is appears to be both safe and conservative. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, Jintai Energy Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Jintai Energy Holdings

We also note that Jintai Energy Holdings improved its EBIT from a last year's loss to a positive HK$4.7m. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Jintai Energy Holdings will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Jintai Energy 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. Over the last year, Jintai Energy Holdings saw substantial negative free cash flow, in total. 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.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Jintai Energy Holdings has net cash of HK$126.2m, as well as more liquid assets than liabilities. So we don't have any problem with Jintai Energy Holdings's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 3 warning signs for Jintai Energy Holdings (1 shouldn't be ignored!) 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.