Zhongji Health Resumes Trading: Tomato Paste De-stocking Behind Gross Loss and Pre-reorganization
June 29 - Zhongji Health resumed trading after removing the *ST label, with its stock symbol reverting to "Zhongji Health" from "*ST Zhongji." On the first day of trading as of press time, the stock was 3.29 yuan per share, up 2.17% from the June 25 close of 3.22 yuan.
Zhongji Health, based in Wujiaqu, Xinjiang, primarily produces tomato products, including bulk tomato paste, small-pack tomato products, and lycopene softgels. The majority of its revenue comes from bulk tomato paste sold to B-end customers in the food processing and catering supply chain.
Zhongji Health was previously designated *ST due to a financial delisting risk warning: all three metrics—total profit, net profit, and non-recurring net profit—were negative in 2024, with revenue after deduction below 300 million yuan and net assets attributable to shareholders negative.
In 2025, the company crossed two financial thresholds required to remove the delisting warning: first, owners' equity turned positive, ending the year at 26.1223 million yuan; second, revenue after deduction reached 488 million yuan, exceeding the 300 million yuan threshold.
However, the company's main profit-generating ability has not yet recovered. In 2025, net profit attributable to shareholders remained negative at 46.2318 million yuan, while non-recurring net profit was a loss of 293 million yuan. In other words, after removing the *ST label, profitability remains under pressure.
Sales Surge and Sharp Production Decline: De-stocking Pushes Revenue Above Threshold
The revenue crossing the threshold was driven by a clear "de-stocking" effort: production contracted, inventories fell, and sales rose. The annual report shows that in 2025, Zhongji Health's bulk tomato paste revenue was 448 million yuan, accounting for 91.12% of total revenue; sales volume was 132,100 tons, up 249.47% year-on-year. Corresponding to the sales increase, production of bulk tomato paste that year was only 7,500 tons, down 95.61% year-on-year, and inventory fell to 91,000 tons, down 57.80%.
The problem is that this is not "selling more to earn more." Corrected data show that in 2025, the gross margin on bulk tomato paste was -20.41%, and the company's overall gross margin was -15.66%. In other words, bulk tomato paste, as the main revenue source, is already selling at a negative gross margin.
Why Sell at a Loss: Price Downtrend and Shelf-Life Inversion Pressure
The company's explanations in its annual report and response to the inquiry letter mainly point to two pressures: price and shelf life.
First, price. The inquiry response noted that in 2025, China's export price for tomato paste (above 5kg) fell to $675/ton, down 32.5% from $1,000/ton in 2024, hitting a recent low. Domestic bulk tomato paste prices also remained depressed amid high industry inventory, with some companies engaging in low-price dumping further exacerbating the price decline.
Blue Whale News compiled the company's annual report data and found that the sales price of bulk tomato paste fell from 7,857.91 yuan/ton in 2023 to 5,866.22 yuan/ton in 2024, and further to 3,395.43 yuan/ton in 2025. The company stated that sales prices fell faster than costs, creating a situation of "selling more, losing more."
Second, shelf life. The annual report disclosed that the shelf life of bulk tomato paste is 720 days, i.e., two years. The company noted that product prices decline nonlinearly as shelf life progresses, with prices dropping particularly sharply near expiry. Amid sharply reduced international orders, near-saturation in the domestic market, and increasing shelf-life pressure, the company needed to boost sales, but selling prices continued to fall, leading to a situation where sales and production prices were inverted.
Removing *ST Doesn't Mean Risk Cleared: High Debt Ratio and Pre-reorganization Progress
From an operational perspective, selling at a loss is not ideal, but it may be a realistic trade-off: if not sold, inventory would tie up capital and face further price declines, impairment, and near-expiry risks; if sold, revenue and cash flow pressure may ease, but profits remain squeezed.
However, removing the *ST label does not mean risks are cleared. In 2025, the company's debt ratio was still 97.79%, and the company and its wholly-owned subsidiary Red Tomato have entered pre-reorganization proceedings.
The company disclosed that in July 2025, Zhongxingcai Guanghua Certified Public Accountants (Special General Partnership) filed a petition with the court for reorganization and pre-reorganization of the company, citing inability to repay maturing debts and apparent lack of solvency but with reorganization value. On the same day, Xinjiang Hengyuan Water Co., Ltd. also filed similar applications for Red Tomato's reorganization and pre-reorganization.
The company says it is now working with the provisional administrator under court supervision to advance creditor reviews, audits, and appraisals. However, pre-reorganization does not mean the court will necessarily accept the reorganization petition. If the court later rules to accept reorganization, the stock may be subject to an additional delisting risk warning; if reorganization fails and bankruptcy is declared, the stock may face termination of listing.
In the first quarter of 2026, the company achieved operating 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; non-recurring net profit was a loss of 20.5002 million yuan. At the end of the first quarter, owners' equity was 6.4928 million yuan, down 75.14% from 26.1223 million yuan at the end of 2025.
For Zhongji Health, resuming trading is only a temporary exit from the *ST label. The core question is: with 90% of revenue coming from bulk tomato paste with negative gross margins, and after completing de-stocking, what can the company rely on to achieve profitability?
