Is HSC Resources Group (HKG:1850) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that HSC Resources Group Limited (HKG:1850) does use debt in its business. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does HSC Resources Group Carry?

The chart below, which you can click on for greater detail, shows that HSC Resources Group had HK$48.8m in debt in October 2025; about the same as the year before. However, its balance sheet shows it holds HK$104.9m in cash, so it actually has HK$56.2m net cash.

A Look At HSC Resources Group's Liabilities

The latest balance sheet data shows that HSC Resources Group had liabilities of HK$117.3m due within a year, and liabilities of HK$16.0k falling due after that. On the other hand, it had cash of HK$104.9m and HK$324.4m worth of receivables due within a year. So it actually has HK$312.0m more liquid assets than total liabilities.

This excess liquidity is a great indication that HSC Resources Group's balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, HSC Resources Group boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is HSC Resources Group's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for HSC Resources Group

In the last year HSC Resources Group had a loss before interest and tax, and actually shrunk its revenue by 15%, to HK$372m. We would much prefer see growth.

So How Risky Is HSC Resources Group?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that HSC Resources Group had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of HK$41m and booked a HK$4.5m accounting loss. Given it only has net cash of HK$56.2m, the company may need to raise more capital if it doesn't reach break-even soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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 HSC Resources Group (of which 1 is concerning!) you should know about.

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.