We're Not Very Worried About Qingling Motors' (HKG:1122) Cash Burn Rate

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, Qingling Motors (HKG:1122) shareholders have done very well over the last year, with the share price soaring by 123%. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So notwithstanding the buoyant share price, we think it's well worth asking whether Qingling Motors' cash burn is too risky. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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When Might Qingling Motors Run Out Of Money?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. As at June 2025, Qingling Motors had cash of CN¥4.5b and no debt. Importantly, its cash burn was CN¥244m over the trailing twelve months. That means it had a cash runway of very many years as of June 2025. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. Depicted below, you can see how its cash holdings have changed over time.

Check out our latest analysis for Qingling Motors

Is Qingling Motors' Revenue Growing?

Given that Qingling Motors actually had positive free cash flow last year, before burning cash this year, we'll focus on its operating revenue to get a measure of the business trajectory. While it's not that amazing, we still think that the 8.2% increase in revenue from operations was a positive. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how Qingling Motors is building its business over time.

How Easily Can Qingling Motors Raise Cash?

Notwithstanding Qingling Motors' revenue growth, it is still important to consider how it could raise more money, if it needs to. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

Qingling Motors has a market capitalisation of CN¥2.4b and burnt through CN¥244m last year, which is 10% of the company's market value. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

So, Should We Worry About Qingling Motors' Cash Burn?

As you can probably tell by now, we're not too worried about Qingling Motors' cash burn. For example, we think its cash runway suggests that the company is on a good path. On this analysis its revenue growth was its weakest feature, but we are not concerned about it. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. Separately, we looked at different risks affecting the company and spotted 2 warning signs for Qingling Motors (of which 1 is concerning!) you should know about.

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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.