LONGi Green Energy Technology Co., Ltd. (SHSE:601012) is a company that utilizes debt to fund its operations, but the key question is whether this debt poses a risk to the company. Debt becomes a problem when a company is unable to pay it off, potentially leading to bankruptcy or share dilution. At the end of September 2024, LONGi Green Energy Technology had CN¥21.4b of debt, but also held CN¥51.1b in cash, resulting in net cash of CN¥29.8b.
The company’s liabilities include CN¥63.0b due within 12 months and CN¥28.9b due beyond 12 months, totaling CN¥26.3b more than its cash and short-term receivables. Even with a market capitalization of CN¥138.7b, these liabilities are likely manageable. Despite its significant liabilities, LONGi Green Energy Technology’s net cash position indicates that it does not carry a heavy debt load.
However, the company’s recent financial performance shows a loss at the EBIT level and a decline in revenue, raising concerns about its ability to maintain a healthy balance sheet in the future. With negative free cash outflow and an accounting loss, it may need to raise capital soon. Overall, there are risks associated with LONGi Green Energy Technology due to its financial performance and debt levels. Investors should consider these factors when evaluating the company as an investment opportunity.
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