We Think Samil PharmaceuticalLtd (KRX:000520) Has A Fair Chunk Of Debt

Warren Buffett famously said, '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. We can see that Samil Pharmaceutical Co.,Ltd (KRX:000520) does use debt in its business. But the real question is whether this debt is making the company risky.

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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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Samil PharmaceuticalLtd Carry?

As you can see below, at the end of September 2025, Samil PharmaceuticalLtd had ₩162.3b of debt, up from ₩143.5b a year ago. Click the image for more detail. However, it does have ₩6.49b in cash offsetting this, leading to net debt of about ₩155.8b.

How Healthy Is Samil PharmaceuticalLtd's Balance Sheet?

The latest balance sheet data shows that Samil PharmaceuticalLtd had liabilities of ₩147.1b due within a year, and liabilities of ₩87.3b falling due after that. Offsetting these obligations, it had cash of ₩6.49b as well as receivables valued at ₩34.7b due within 12 months. So it has liabilities totalling ₩193.2b more than its cash and near-term receivables, combined.

This deficit is considerable relative to its market capitalization of ₩242.0b, so it does suggest shareholders should keep an eye on Samil PharmaceuticalLtd's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Samil PharmaceuticalLtd 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.

View our latest analysis for Samil PharmaceuticalLtd

Over 12 months, Samil PharmaceuticalLtd saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

Caveat Emptor

Importantly, Samil PharmaceuticalLtd had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₩17b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩9.4b of cash over the last year. So suffice it to say we do consider the stock to be risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 2 warning signs with Samil PharmaceuticalLtd (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

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.