Is Wolong Electric GroupLtd (SHSE:600580) A Risky Investment?
Is Wolong Electric GroupLtd (SHSE:600580) A Risky Investment?
The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, Wolong Electric Group Co.,Ltd. (SHSE:600580) does carry debt. But is this debt a concern to shareholders?
Charlie Munger支持的外部基金經理李錄坦言,“最大的投資風險不是價格波動,而是是否會遭受永久性資本損失。” 當你研究一個公司的風險時,考慮其資產負債表就顯得特別重要,因爲公司倒閉時往往會涉及到債務。不過,臥龍電驅(SHSE:600580)確實擁有債務。但這個債務是否會令股東們擔憂呢?
Why Does Debt Bring Risk?
爲什麼債務會帶來風險?
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. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.
債務是幫助企業成長的工具,但如果企業無法償還其貸款人,那麼它就處於他們的控制之下。最終,如果公司不能履行償還債務的法律義務,股東可能會一無所有。然而,更常見(但仍然痛苦)的情況是,公司必須以低價籌集新的股權資本,從而永久性地稀釋股東。當然,債務的好處是,它通常代表着廉價資本,特別是當它替換具有高回報率再投資能力的公司的稀釋時。當我們考慮公司的債務使用時,我們首先查看現金和債務的總體情況。
What Is Wolong Electric GroupLtd's Net Debt?
臥龍電驅有淨債務嗎?
As you can see below, Wolong Electric GroupLtd had CN¥6.25b of debt, at March 2024, which is about the same as the year before. You can click the chart for greater detail. However, it does have CN¥2.44b in cash offsetting this, leading to net debt of about CN¥3.81b.
如下圖所示,臥龍電驅在2024年3月份有6.25億元的債務,與前一年大致相同。您可以點擊圖表以獲取更詳細的信息。然而,它有2.44億元的現金用於抵消這個債務,從而產生了約3.81億元的淨債務。
![debt-equity-history-analysis](https://usnewsfile.moomoo.com/public/MM-PersistNewsContentImage/7781/20240611/0-993fbb4ae2098d9a5994119b35300a78-0-f6579a043c79daecd68f1db23dfc2dad.png/big)
How Healthy Is Wolong Electric GroupLtd's Balance Sheet?
臥龍電驅的資產負債表狀況如何?
According to the last reported balance sheet, Wolong Electric GroupLtd had liabilities of CN¥9.99b due within 12 months, and liabilities of CN¥3.90b due beyond 12 months. Offsetting this, it had CN¥2.44b in cash and CN¥6.72b in receivables that were due within 12 months. So it has liabilities totalling CN¥4.73b more than its cash and near-term receivables, combined.
根據上一份報告的資產負債表,臥龍電驅有999億元的負債在12個月內到期,390億元的負債超出了12個月。與此相抵,它有2.44億元的現金和6.72億元應於12個月內到期的應收賬款。因此,它的負債總額比其現金和短期應收賬款多達4.73億元。
Wolong Electric GroupLtd has a market capitalization of CN¥17.1b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk.
臥龍電驅的市值爲171億元,因此,如果需要,它很有可能籌集資金來改善其資產負債表。但我們肯定要密切關注其債務帶來的風險。
We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).
我們使用兩個主要比率來分析債務與收益之間的關係。第一個比率是淨債務與利息、稅、折舊和攤銷前利潤(EBITDA)的比率,第二個比率是其利潤前利潤和稅(EBIT)覆蓋利息支出的次數(或其利息覆蓋比率)。這種方法的優點在於我們考慮到了債務的絕對數量(通過淨債務與EBITDA的比率),以及與這些債務相關的實際利息支出(通過其利息覆蓋比率)。
Wolong Electric GroupLtd's net debt is sitting at a very reasonable 2.2 times its EBITDA, while its EBIT covered its interest expense just 4.7 times last year. While these numbers do not alarm us, it's worth noting that the cost of the company's debt is having a real impact. Wolong Electric GroupLtd grew its EBIT by 4.5% in the last year. Whilst that hardly knocks our socks off it is a positive when it comes to debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Wolong Electric GroupLtd's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
臥龍電驅的淨債務與EBITDA的比率非常合理,僅爲2.2倍,而去年的利息支出僅佔EBIT的4.7倍。雖然這些數字並不讓我們感到擔憂,但值得注意的是,公司債務成本正在產生實際影響。臥龍電驅去年的EBIT增長了4.5%。雖然這並不令人驚訝,但這對於債務來說是個好消息。資產負債表顯然是您在分析債務時需要關注的領域。但更重要的是,未來的收益,而不是任何東西,都將決定臥龍電驅能否保持健康的資產負債表。因此,如果您想查看專業人士的看法,您可能會發現此分析師盈利預測免費報告很有趣。
Finally, a company can only pay off debt with cold hard cash, not accounting profits. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. Looking at the most recent three years, Wolong Electric GroupLtd recorded free cash flow of 22% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.
最後,公司只能用現金而不是會計利潤償還債務。因此,我們顯然需要查看EBIT是否會導致相應的自由現金流。從最近三年來看,臥龍電驅的自由現金流佔EBIT的比例爲22%,這比我們預期的要弱。在償還債務方面,這並不好。
Our View
我們的觀點
Wolong Electric GroupLtd's struggle to convert EBIT to free cash flow had us second guessing its balance sheet strength, but the other data-points we considered were relatively redeeming. But on the bright side, its ability to to grow its EBIT isn't too shabby at all. Looking at all the angles mentioned above, it does seem to us that Wolong Electric GroupLtd is a somewhat risky investment as a result of its debt. Not all risk is bad, as it can boost share price returns if it pays off, but this debt risk is worth keeping in mind. 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 Wolong Electric GroupLtd you should be aware of, and 1 of them is concerning.
臥龍電驅運用EBIT創造自由現金流的難度讓我們對其資產負債表的強度產生了第二次猜測,但我們認爲其他考慮到的數據點還是可以挽救的。但從好的一面來看,它增長EBIT的能力也非常不錯。綜上所述,我們認爲臥龍電驅是一項有一定風險的投資,因爲其債務。並不是所有的風險都是不好的,如果這些風險得到了回報,它們可能會增加股價回報。但是,這種債務風險值得記在心中。
At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.
總的來說,專注於沒有淨債務的公司往往更好。您可以訪問我們的特別列表,其中包含這些公司(所有這些公司都有盈利增長的記錄)。這是免費的。
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