Does JD Logistics (HKG:2618) Have A 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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, JD Logistics, Inc. (HKG:2618) does carry debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does JD Logistics Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 JD Logistics had CN¥23.7b of debt, an increase on CN¥7.23b, over one year. However, its balance sheet shows it holds CN¥31.2b in cash, so it actually has CN¥7.50b net cash.

A Look At JD Logistics' Liabilities

According to the last reported balance sheet, JD Logistics had liabilities of CN¥39.8b due within 12 months, and liabilities of CN¥20.0b due beyond 12 months. Offsetting this, it had CN¥31.2b in cash and CN¥18.1b in receivables that were due within 12 months. So it has liabilities totalling CN¥10.5b more than its cash and near-term receivables, combined.

Since publicly traded JD Logistics shares are worth a total of CN¥65.5b, 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. Despite its noteworthy liabilities, JD Logistics boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for JD Logistics

On the other hand, JD Logistics saw its EBIT drop by 7.2% in the last twelve months. That sort of decline, if sustained, will obviously make debt harder to handle. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if JD Logistics 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. JD Logistics 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 last two years, JD Logistics actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

Although JD Logistics's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of CN¥7.50b. And it impressed us with free cash flow of CN¥14b, being 273% of its EBIT. So we don't have any problem with JD Logistics's use of debt. We'd be motivated to research the stock further if we found out that JD Logistics insiders have bought shares recently. If you would too, then you're in luck, since today we're sharing our list of reported insider transactions for free.

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.

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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.