Zhongji Health Removes ST Label: Tomato Paste Inventory Clearing Still Loss-Making

On June 29, Zhongji Health resumed trading after removing the special treatment (ST) label, with the stock name changing from '*ST Zhongji' to 'Zhongji Health.' On the first day of resumption, as of press time, the share price was 3.29 yuan, up 2.17% from the closing price of 3.22 yuan on June 25.

Zhongji Health, headquartered in Wujiaqu, Xinjiang, is mainly engaged in tomato products, including bulk tomato paste, small packaged tomato products, and lycopene soft capsules. Unlike consumer-facing 'small bottle ketchup,' the company's revenue is mostly from bulk tomato paste, which is sold to B-end customers as a basic ingredient in food processing and catering supply chains.

The reason for the previous '*ST' designation was the financial delisting risk warning red line: in 2024, the company's total profit, net profit, and net profit after deducting non-recurring gains and losses were all negative, with net revenue after deductions below 300 million yuan, and net assets attributable to shareholders of the listed company negative.

Met Delisting Threshold but Still Haven't Restored Core Profitability

As of 2025, Zhongji Health crossed two financial thresholds needed to remove the delisting risk warning: first, owners' equity turned positive, reaching 26.12 million yuan at year-end; second, net revenue after deduction reached 488 million yuan, above the 300 million yuan red line.

However, the company remains in a loss position: in 2025, net profit attributable to shareholders of the listed company was a loss of 46.23 million yuan, and net profit after deducting non-recurring gains and losses was a loss of 293 million yuan. In other words, after removing the '*ST' label, core profitability has not yet recovered.

Revenue Boosted by Inventory Clearing: More Sales, More Losses

The annual report shows that the company's obvious 'inventory clearing' actions helped revenue cross the line: production shrank, inventory declined, and sales volume increased. In 2025, 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 huge increase in sales volume, the company's production of bulk tomato paste that year was only 7,500 tons, down 95.61% year-on-year; inventory fell to 91,000 tons, down 57.80% year-on-year.

The problem is that this is not 'selling more, earning more.' According to the company's restated data, the gross margin for bulk tomato paste in 2025 was -20.41%, and the overall gross margin was -15.66%. In other words, the main business, contributing over 90% of revenue, has entered a state of negative gross profit.

Two Major Pressures for Selling at a Loss: Price Decline and Shelf Life

In the annual report and inquiry reply, the company explained the loss-making sales as driven by two core pressures: price and shelf life.

In terms of price, the inquiry reply mentioned that in 2025, China's average export price for tomato paste over 5kg fell to 675 USD/ton, down 32.5% from 1,000 USD/ton in 2024, hitting a recent low. Domestic bulk tomato paste prices also remained depressed, with industry inventory at high levels, and some companies' low-price dumping further exacerbated downward price pressure.

Blue Whale News reviewed the annual report and found that the average selling price per ton of bulk tomato paste dropped from 7,857.91 yuan 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 product selling prices exceeded the decline in costs, creating a situation of 'selling more, losing more.'

Regarding shelf life, the company's annual report disclosed that the shelf life of bulk tomato paste is 720 days. This means unsold products will become worthless. The company indicated that based on actual market sales of tomato products, the price decreases non-linearly as the shelf life approaches, with particularly sharp declines for products nearing expiry. Against the backdrop of a sharp decline in international orders, a near-saturated domestic market, and increased shelf life pressure, the company increased sales volume, but selling prices continued to fall, resulting in a situation where production costs exceeded selling prices.

From a business perspective, selling at a loss is not ideal, but may be the more realistic choice. If not sold, inventory continues to occupy funds and may face further price declines, impairment, or even expiry risks; if sold, revenue rises, cash flow and inventory pressure are somewhat alleviated, but profit side remains under pressure.

Removing ST Label Does Not Mean Elimination of Risk: High Debt Ratio and Entry into Pre-Restructuring

However, removing the ST label does not mean risk is cleared. In 2025, Zhongji Health's debt-to-asset ratio was still as high as 97.79%, and the company and its wholly-owned subsidiary Red Tomato have entered pre-restructuring procedures.

According to disclosures, in July 2025, Zhongxing Caiguanghua Certified Public Accountants (Special General Partnership) applied to the court for restructuring and pre-restructuring of the company on the grounds that the company cannot pay off mature debts and is clearly lacking solvency but has restructuring value. On the same day, Xinjiang Hengyuan Water Services Co., Ltd. also applied for restructuring and pre-restructuring of Red Tomato on similar grounds.

The company stated that it is working with the interim administrator under court supervision and guidance to advance matters such as creditor claims review, audit, and evaluation. However, pre-restructuring does not mean the court will definitely accept the restructuring application. If restructuring is subsequently accepted, the stock may be subject to an additional delisting risk warning; if restructuring fails and the company is declared bankrupt, the stock will face termination of listing risk.

As of press time, the company had no response.

Still Loss-Making in Q1 2026: Owners' Equity Continues to Decline

In the first quarter of 2026, Zhongji Health achieved revenue of 54.82 million yuan, down 30.33% year-on-year; net profit attributable to shareholders of the listed company was a loss of 19.63 million yuan, compared to a loss of 7.26 million yuan in the same period last year; net profit after deducting non-recurring gains and losses was a loss of 20.50 million yuan.

At the end of the first quarter, owners' equity attributable to shareholders of the listed company fell to 6.49 million yuan, a decrease of 75.14% from 26.12 million yuan at the end of 2025.

For Zhongji Health, resumption of trading is only a temporary exit from the '*ST' label. The real key is: after inventory clearing, what can the company rely on to achieve profitability instead of continuing to rely on bulk tomato paste with negative gross margins?