We Think Grand Power Logistics Group (HKG:8489) Has A Fair Chunk Of Debt

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We can see that Grand Power Logistics Group Limited (HKG:8489) does use debt in its business. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Grand Power Logistics Group Carry?

The image below, which you can click on for greater detail, shows that at June 2025 Grand Power Logistics Group had debt of HK$52.6m, up from HK$47.3m in one year. However, it does have HK$51.8m in cash offsetting this, leading to net debt of about HK$847.0k.

How Strong Is Grand Power Logistics Group's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Grand Power Logistics Group had liabilities of HK$123.2m due within 12 months and liabilities of HK$222.0k due beyond that. Offsetting this, it had HK$51.8m in cash and HK$104.4m in receivables that were due within 12 months. So it can boast HK$32.7m more liquid assets than total liabilities.

This surplus liquidity suggests that Grand Power Logistics Group's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. Having regard to this fact, we think its balance sheet is as strong as an ox. But either way, Grand Power Logistics Group has virtually no net debt, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Grand Power Logistics Group will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Grand Power Logistics Group

In the last year Grand Power Logistics Group wasn't profitable at an EBIT level, but managed to grow its revenue by 3.4%, to HK$962m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, Grand Power Logistics Group had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable HK$26m at the EBIT level. 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. But we'd be more likely to spend time trying to understand the stock if the company made a profit. So it seems too risky for our taste. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Grand Power Logistics Group (of which 2 can't be ignored!) you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.