Zhongji Health still loses after 'ST' removal: Tomato paste destocking sells at loss
Image source: Visual China
On June 29, Zhongji Health resumed trading after 'ST' removal, changing its stock abbreviation from "*ST Zhongji" to "Zhongji Health." On the first day back, the stock traded at 3.29 yuan per share as of press time, up 2.17% from the close of 3.22 yuan on June 25.
Zhongji Health, headquartered in Wujiaqu, Xinjiang, specializes in tomato products, including bulk tomato paste, small-pack tomato products, and lycopene softgels. Bulk tomato paste is its main revenue source, targeting B2B clients like food processors and restaurant supply chains.
Zhongji Health's 2025 revenue was mainly supported by bulk tomato paste, but profit remained negative. The company had been marked with '*ST' due to financial red flags: negative total profit, net profit, and recurring net profit in 2024, with audited revenue (excluding unusual items) below 300 million yuan and negative shareholders' equity.
In 2025, the company crossed two thresholds for removing the risk warning: shareholders' equity turned positive to 26.1223 million yuan at year-end; and audited revenue (excluding unusual items) reached 488 million yuan, above the 300 million yuan line.
However, the company did not return to profitability. Net profit attributable to shareholders in 2025 still lost 46.2318 million yuan, and recurring net profit lost 293 million yuan. In other words, the '*ST' label was removed, but core profitability remains unrepaired.
Destocking drove volume up: production drastically reduced
The revenue threshold was crossed through 'destocking': production contracted, inventory fell, sales rose. The annual report shows 2025 bulk tomato paste revenue of 448 million yuan, accounting for 91.12% of total revenue; sales volume 132,100 tons, up 249.47% year-on-year. Correspondingly, the company's production of bulk tomato paste that year was only 7,500 tons, down 95.61%; inventory dropped to 91,000 tons, down 57.80%.
But this is not a profit-boosting business. Corrected data show that the gross margin of bulk tomato paste in 2025 was -20.41%, and overall gross margin was -15.66%. In other words, the main business contributing over 90% of revenue is already at negative gross margin.
Sell more, lose more: price decline and 720-day shelf life pressure
The company cited two key pressures in the annual report and reply to inquiry letter: price and shelf life.
On price: the reply mentioned that China's export price for tomato paste over 5kg fell to $675/ton in 2025, down 32.5% from $1,000/ton in 2024, a multi-year low. Domestic bulk tomato paste prices also remained weak, with high industry inventory and some companies dumping at low prices, exacerbating downward pressure.
According to the company's data, bulk tomato paste selling price 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 was steeper than cost reductions, creating a 'sell more, lose more' situation.
On shelf life: the annual report disclosed that bulk tomato paste has a shelf life of 720 days. Products not sold risk being unsellable. The company noted that product prices decline non-linearly as shelf life shortens, with severe drops near expiration. Amid sharply reduced international orders, nearing saturation in domestic markets, and mounting shelf life pressure, the company needed to boost sales, but selling prices continued to fall, resulting in negative margin between production cost and selling price.
From an operational perspective, selling at a loss is not ideal but may be more pragmatic: not selling ties up capital and risks further price drops, impairment, or expiration; selling relieves revenue and cash flow pressure, but profit remains strained.
Removing 'ST' doesn't eliminate risk: pre-reorganization continues, Q1 extended losses
However, removing the 'ST' label does not mean risk is eliminated. The company's debt ratio in 2025 was still 97.79%, and the company and its wholly-owned subsidiary Red Tomato have entered pre-reorganization proceedings.
According to disclosures, in July 2025, creditor Zhongxinghua Certified Public Accountants (Special General Partnership) filed a petition with the court for reorganization and pre-reorganization of Zhongji Health, on grounds that the company cannot pay its due debts and obviously lacks solvency but has reorganization value. On the same day, Xinjiang Hengyuan Water Co., Ltd. also filed a similar petition for Red Tomato's reorganization and pre-reorganization.
The company said it is working with interim management under court supervision and guidance on claim verification, auditing, and evaluation. But pre-reorganization does not mean the court will formally accept the reorganization request. If the court accepts, the stock may be subject to delisting risk warning; if reorganization fails and bankruptcy is declared, the stock faces termination risk.
In the first quarter of 2026, the company achieved revenue of 54.8219 million yuan, down 30.33% year-on-year; net loss attributable to parent was 19.6295 million yuan, compared to a loss of 7.2557 million yuan in the same period last year; recurring net loss was 20.5002 million yuan. By the end of the first quarter, shareholders' equity fell to 6.4928 million yuan, a 75.14% decrease from the 26.1223 million yuan at end of 2025.
For Zhongji Health, resuming trading only temporarily removes the '*ST' label. The core issue remains: when 90% of revenue comes from bulk tomato paste with negative gross margin, what will drive profitability and improvement after destocking?
