Health Check: How Prudently Does Hin Sang Group (International) Holding (HKG:6893) Use Debt?

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.' 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. As with many other companies Hin Sang Group (International) Holding Co. Ltd. (HKG:6893) makes use of debt. But the real question is whether this debt is making the company risky.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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.

What Is Hin Sang Group (International) Holding's Debt?

The chart below, which you can click on for greater detail, shows that Hin Sang Group (International) Holding had HK$336.8m in debt in September 2025; about the same as the year before. On the flip side, it has HK$8.74m in cash leading to net debt of about HK$328.0m.

How Healthy Is Hin Sang Group (International) Holding's Balance Sheet?

The latest balance sheet data shows that Hin Sang Group (International) Holding had liabilities of HK$304.1m due within a year, and liabilities of HK$91.4m falling due after that. Offsetting this, it had HK$8.74m in cash and HK$8.76m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by HK$378.0m.

Given this deficit is actually higher than the company's market capitalization of HK$289.3m, we think shareholders really should watch Hin Sang Group (International) Holding's debt levels, like a parent watching their child ride a bike for the first time. 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. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Hin Sang Group (International) Holding'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.

Check out our latest analysis for Hin Sang Group (International) Holding

In the last year Hin Sang Group (International) Holding wasn't profitable at an EBIT level, but managed to grow its revenue by 10%, to HK$96m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, Hin Sang Group (International) Holding had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at HK$13m. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of HK$40m. In the meantime, we 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. Case in point: We've spotted 3 warning signs for Hin Sang Group (International) Holding you should be aware of, and 1 of them is a bit concerning.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.