Zhongji Health Resumes Trading After Lifting ST: Tomato Paste De-stocking Still at a Loss

On June 29, Zhongji Health resumed trading after removing the special treatment label, with its stock symbol changed from '*ST Zhongji' to 'Zhongji Health.' On the first day back, as of press time, the stock traded at 3.29 yuan per share, up 2.17% from the closing price of 3.22 yuan on June 25.

Zhongji Health, based in Wujiaqu, Xinjiang, primarily produces tomato products, including bulk tomato paste, small-pack tomato products, and lycopene soft capsules. The bulk tomato paste segment accounts for the bulk of revenue and serves as a basic raw material for food processing and foodservice supply chains, targeting B2B customers.

The company previously received the 'ST' label due to financial delisting risk triggers: in 2024, profit before tax, net profit, and recurring net profit were all negative, and revenue after deductions was below 300 million yuan, while net assets attributable to shareholders turned negative.

In 2025, Zhongji Health crossed the two financial thresholds required to lift the delisting warning: owners' equity attributable to shareholders turned positive, reaching 26.1223 million yuan at year-end; and revenue after deductions reached 488 million yuan, above the 300 million yuan threshold.

However, the company's main business still lacks profitability. Net profit attributable to shareholders in 2025 remained a loss of 46.2318 million yuan, while recurring net profit was a loss of 293 million yuan. Removing the '*ST' label does not equate to returning to profit.

Sales Volume Surges but Gross Margin Negative: De-stocking Still Under Pressure

The revenue threshold was met through 'de-stocking': production contracted, inventory decreased, and sales volume increased. According to the annual report, bulk tomato paste revenue in 2025 was 448 million yuan, accounting for 91.12% of total revenue; sales volume was 132,100 tons, up 249.47% year-on-year. Correspondingly, production volume of bulk tomato paste was only 7,500 tons, down 95.61%, and inventory dropped to 91,000 tons, down 57.80%.

The problem is that this is not a business that becomes more profitable with higher sales. According to corrected data, the gross margin of bulk tomato paste in 2025 was -20.41%, and the overall gross margin was -15.66%. The core business, accounting for over 90% of revenue, has negative gross margin.

Reasons for Selling at a Loss: Price Decline and Shelf-Life Pressure

The company's explanation in the annual report and response to the inquiry letter points to two key pressures: price and shelf life.

On price, the company noted that China's export price of tomato paste (above 5kg) fell to $675 per ton in 2025, down 32.5% from $1,000 per ton in 2024, hitting a multi-year low. Domestic bulk tomato paste prices also remained weak, with high industry inventories leading some companies to sell at low prices, exacerbating the downward trend.

Blue Whale reporters reviewed the company's annual reports and found that the average selling price of bulk tomato paste fell from 7,857.91 yuan per ton in 2023 to 5,866.22 yuan in 2024, and further to 3,395.43 yuan in 2025. The company stated that the decline in selling prices exceeded the decline in costs, creating a situation where 'the more you sell, the more you lose.'

On shelf life, the company disclosed that the shelf life of bulk tomato paste is 720 days. Unsold products risk becoming obsolete. In its response, the company noted that according to market practice, product prices decline non-linearly with remaining shelf life, with sharp declines near expiry. Amid a sharp drop in international orders, near-saturation in the domestic market, and increasing shelf-life pressure, the company had to increase sales, but selling prices continued to fall, leading to a situation where selling prices were lower than costs.

Operationally, selling at a loss may be a pragmatic choice: not selling ties up capital and risks further price declines, write-downs, or expiry; selling relieves cash flow and inventory pressure but weighs on profits.

Lifting ST Does Not Mean Clean Exit: High Debt Ratio, Pre-reorganization Proceeding

However, lifting the ST label does not mean all risks are cleared. The company's debt-to-asset ratio was still 97.79% in 2025, and the company and its wholly-owned subsidiary Red Tomato have entered pre-reorganization procedures.

The company disclosed that in July 2025, accounting firm Zhongxingcaiguanghua (Special General Partnership) applied to the court for reorganization and pre-reorganization of the company on the grounds that the company is unable to pay its due debts and clearly lacks solvency but has reorganization value. On the same day, Xinjiang Hengyuan Water Co., Ltd. also applied for reorganization and pre-reorganization of Red Tomato on similar grounds.

The company stated it is working with the interim administrator under court supervision to advance matters such as creditor claims review, audit, and valuation. Pre-reorganization does not guarantee the court will accept the reorganization petition; if the court accepts, the stock may face additional delisting warning. If reorganization fails and the company is declared bankrupt, the stock may face termination of listing.

In Q1 2026, Zhongji Health reported revenue of 54.8219 million yuan, down 30.33% year-on-year; net profit attributable to shareholders was a loss of 19.6295 million yuan, compared to a loss of 7.2557 million yuan in the same period last year; recurring net profit was a loss of 20.5002 million yuan. At the end of Q1, owners' equity attributable to shareholders fell to 6.4928 million yuan, down 75.14% from 26.1223 million yuan at end-2025.

For Zhongji Health, resuming trading merely removes the '*ST' label. The key question remains: when 90% of revenue comes from bulk tomato paste with negative gross margin, what can the company rely on for profitability after de-stocking?