Zhongji Health Tomato Paste Destocking: Higher Volume, Still Losses

On June 29, Zhongji Health resumed trading post-ST removal, with stock abbreviation changed 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, based in Wujiaqu, Xinjiang, mainly produces tomato products, including bulk tomato paste, small-pack tomato products, and lycopene softgels. Its revenue primarily comes from bulk tomato paste, which serves as a basic raw material for food processing and catering supply chains, mainly sold to B-end customers.

The company's 2025 revenue was largely supported by bulk tomato paste, but profit remained under pressure. The previous 'ST' designation was due to financial-based delisting risk warning thresholds: in 2024, the company's total profit, net profit, and non-recurring net profit were all negative, and revenue after deduction was below 300 million yuan, with net assets attributable to shareholders negative. Therefore, the stock was labeled '*ST'.

In 2025, Zhongji Health crossed two financial thresholds required to remove the delisting risk warning: equity attributable to shareholders turned positive to 26.1223 million yuan at year-end; deducted revenue reached 488 million yuan, above the 300 million yuan red line. However, the company still made a loss in 2025: net profit attributable to shareholders was -46.2318 million yuan, and non-recurring net profit was -293 million yuan.

The revenue threshold was supported by destocking actions: production contraction, inventory decline, and sales increase. The annual report shows that 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% YoY. Correspondingly, the production volume of bulk tomato paste that year was only 7,500 tons, down 95.61%, and inventory dropped to 91,000 tons, down 57.80%.

However, this does not mean selling more makes money. Corrected data shows that in 2025, the gross margin of bulk tomato paste was -20.41%, and the overall gross margin was -15.66%. That is, the main business had a negative gross margin.

Sales Up but Gross Margin Negative: Price and Shelf Life Pressure

In the annual report and inquiry reply, Zhongji Health pointed to two main pressures: price and shelf life.

On price, the company's inquiry reply mentioned that in 2025, China's export average price of tomato paste over 5kg fell to $675/ton, down 32.5% from $1,000/ton in 2024, a new low. Domestic bulk tomato paste prices remained sluggish, industry inventory was high, and some companies' low-price dumping further aggravated downward price pressure.

Blue Whale reporters reviewing the company's annual report found that the unit sales price of bulk tomato paste dropped 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 said the drop in selling prices outpaced cost reduction, leading to a situation of 'selling more, losing more'.

On shelf life, the annual report disclosed that bulk tomato paste has a shelf life of 720 days. The company said if products cannot be sold, they become a burden; according to market practice, product prices decline non-linearly with remaining shelf life, with particularly sharp drops near expiry. Amid sharp decline in international orders, near-saturation of domestic market, and increased shelf-life pressure, the company needed to boost sales, but selling prices kept falling, resulting in a price inversion.

From a business perspective, selling at a loss is not ideal, but may be more realistic: not selling inventory continues to tie up funds and risks further devaluation and expiration; selling helps relieve cash flow and inventory pressure, but profit remains pressured.

ST Removal ≠ Risk Elimination: High Debt Ratio and Pre-reorganization

Removing the ST label does not mean risks are 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-reorganization procedures.

The company disclosed that in July 2025, Zhongxingcai Guanghua Certified Public Accountants (special general partnership) applied to the court for reorganization and pre-reorganization of the company on the grounds that the company was unable to repay due debts and was clearly lacking solvency but had reorganization value. On the same day, Xinjiang Hengyuan Water 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 under court supervision to advance debt review, audit, and evaluation. However, pre-reorganization does not mean the court will accept the reorganization petition: if the court later accepts the reorganization, the company's stock may be subject to additional delisting risk warnings; if reorganization fails and bankruptcy is declared, the stock faces termination of listing.

Q1 2026 Still Losses: Equity Further Declined

In Q1 2026, Zhongji Health reported revenue of 54.8219 million yuan, down 30.33% YoY; net profit attributable to shareholders was -19.6295 million yuan, vs -7.2557 million yuan in the same period last year; non-recurring net profit was -20.5002 million yuan. By end of Q1, net assets attributable to shareholders fell to 6.4928 million yuan, down 75.14% from 26.1223 million yuan at end of 2025.

For Zhongji Health, resumption merely means temporarily leaving the '*ST' label. The core question remains: when 90% of revenue comes from bulk tomato paste with negative gross margin, after destocking, what can the company rely on to restore profitability?