Zhongji Health After Removing ST Label: Tomato Paste Destocking Sales Grow but Gross Margin Negative

On June 29, Zhongji Health resumed trading after removing the ST label, with its stock abbreviation changed from "*ST Zhongji" to "Zhongji Health." On the first day of resumption, as of press time, the stock price was 3.29 yuan/share, up 2.17% from the closing price of 3.22 yuan/share on June 25.

Zhongji Health, headquartered in Wujiaqu, Xinjiang, primarily engages in tomato products, including bulk tomato paste, small packaged tomato products, and lycopene soft capsules. The company's main revenue comes from bulk tomato paste, which serves as a basic ingredient for food processing and catering supply chains, mainly sold to B-end customers.

The "*ST" designation originated from unmet financial indicators. In 2024, the company's total profit, net profit, and non-recurring net profit were all negative, and its revenue after deductions was below 300 million yuan, while net assets attributable to shareholders of the listed company were negative, thus it was marked as "*ST."

In 2025, the company crossed the two financial thresholds required to remove the delisting risk warning: first, owners' equity turned positive, reaching 26.1223 million yuan at year-end; second, revenue after deductions reached 488 million yuan, above the 300 million yuan red line.

Despite removing "*ST," the company's main business profitability has not recovered. In 2025, net profit attributable to shareholders of the listed company still posted a loss of 46.2318 million yuan, and non-recurring net profit after deductions was a loss of 293 million yuan.

The annual report shows that the revenue threshold was crossed behind an obvious "destocking" move: production contraction, inventory decline, and sales increase. 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 sharp sales increase, the company's bulk tomato paste production that year was only 7,500 tons, down 95.61%; inventory dropped to 91,000 tons, down 57.80%.

However, this is not a case of selling more to make more money. According to corrected data, the gross margin of bulk tomato paste in 2025 was -20.41%, and the overall gross margin of the company was -15.66%. That is, the main business accounting for over 90% of revenue was already in a state of negative gross margin.

Why Choose to Sell at a Loss Despite Losses: Price Pressure and Shelf Life Constraints

The company's explanations in the annual report and response to the inquiry letter point to two core pressures: price and shelf life.

First, look at price. The company mentioned that in 2025, the export average price of Chinese tomato paste over 5kg dropped to $675 per ton, down 32.5% from $1,000 per ton in 2024, hitting a new low in recent years. Domestic bulk tomato paste prices remained low, with industry inventory at high levels, and some companies' low-price selling further exacerbated downward price pressure.

Blue Whale News reviewed the company's annual reports and found that the sales unit price of bulk tomato paste fell from 7,857.91 yuan/ton in 2023 to 5,866.22 yuan/ton in 2024, further dropping to 3,395.43 yuan/ton in 2025. The company said that the decline in product sales prices outpaced the decline in costs, creating a "sell more, lose more" situation.

Next, consider the shelf life. The company's annual report disclosed that the shelf life of bulk tomato paste is 720 days, i.e., two years. If unsold, products face the risk of being "stuck." In the company's response, it also mentioned that based on actual tomato product market sales, product prices show a non-linear decline trend with shelf life, with prices near expiration dropping particularly sharply. Amid sharp decline in international orders, near-saturation of domestic markets, and increased shelf life pressure, the company had to increase sales, but selling prices continued to fall, resulting in a price inversion.

From an operational perspective, selling at a loss is not ideal, but it may be a more realistic choice now: not selling would continue to tie up capital and face further price cuts, impairment, and even near-expiry risk; selling relieves cash flow and inventory pressure, though profit remains under pressure.

Removing ST Does Not Equal Risk Clearance: High Asset-Liability Ratio and Pre-reorganization

However, removing the ST does not mean risks are cleared. In 2025, the company's asset-liability ratio was still as high as 97.79%, and the company and its wholly-owned subsidiary Red Tomato have entered pre-reorganization procedures.

According to disclosures, in July 2025, Zhongxingcai Guanghua Certified Public Accountants (Special General Partnership) filed an application with the court for reorganization and pre-reorganization of the company on the grounds that the company was unable to pay off its due debts and obviously lacked solvency but had reorganization value. On the same day, Xinjiang Hengyuan Water Service Co., Ltd. also applied for reorganization and pre-reorganization of Red Tomato on similar grounds.

Currently, the company says it is working with the interim manager to advance matters such as debt review, auditing, and evaluation under court supervision and guidance. However, pre-reorganization does not mean the court will definitely accept the reorganization application. If the court accepts the reorganization, the stock may face an additional delisting risk warning; if reorganization fails and bankruptcy is declared, the stock may face termination of listing.

As of press time, the company has no response.

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 of the listed company was a loss of 19.6295 million yuan, compared with a loss of 7.2557 million yuan in the same period last year; non-recurring net profit after deductions was a loss of 20.5002 million yuan. By the end of the first quarter, owners' equity attributable to shareholders of the listed company dropped to 6.4928 million yuan, a decrease of 75.14% from 26.1223 million yuan at the end of 2025.

For Zhongji Health, resumption of trading is only a temporary exit from the "*ST" label. The key issue remains: when main revenue comes from bulk tomato paste with negative gross margin, what can the company rely on to achieve profitability after destocking?