Is Zhixin Group Holding (HKG:2187) A Risky Investment?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We can see that Zhixin Group Holding Limited (HKG:2187) does use debt in its business. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Zhixin Group Holding Carry?

You can click the graphic below for the historical numbers, but it shows that Zhixin Group Holding had CN¥397.9m of debt in June 2025, down from CN¥445.5m, one year before. On the flip side, it has CN¥15.7m in cash leading to net debt of about CN¥382.2m.

How Strong Is Zhixin Group Holding's Balance Sheet?

According to the last reported balance sheet, Zhixin Group Holding had liabilities of CN¥521.2m due within 12 months, and liabilities of CN¥279.8m due beyond 12 months. Offsetting these obligations, it had cash of CN¥15.7m as well as receivables valued at CN¥416.8m due within 12 months. So it has liabilities totalling CN¥368.5m more than its cash and near-term receivables, combined.

When you consider that this deficiency exceeds the company's CN¥294.6m market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But it is Zhixin Group Holding's earnings that will influence how the balance sheet holds up in the future. 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.

Check out our latest analysis for Zhixin Group Holding

Over 12 months, Zhixin Group Holding reported revenue of CN¥596m, which is a gain of 13%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Zhixin Group Holding had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping CN¥73m. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. For example, we would not want to see a repeat of last year's loss of CN¥125m. In the meantime, we consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for Zhixin Group Holding (1 can't be ignored) you should be aware of.

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.