On June 29, Zhongji Health resumed trading after the ST designation was removed, with its stock abbreviation changed back to “Zhongji Health” from “*ST Zhongji.” 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 on June 25.
Zhongji Health is located in Wujiaqu, Xinjiang, and mainly produces tomato products, including bulk tomato paste, small-pack tomato products, and lycopene soft gels. The bulk tomato paste accounts for the majority of its revenue, serving as a basic raw material for food processing and restaurant supply chains, primarily sold to B-end customers.
Bulk tomato paste supported Zhongji Health’s revenue in 2025 but also dragged down its profits. The company had previously received the ST designation due to financial red flags: in 2024, total profit, net profit, and net profit excluding non-recurring items were all negative, with revenue after deductions below 300 million yuan, and net assets attributable to shareholders negative. According to the Shenzhen Stock Exchange listing rules, the stock was marked “*ST.”
By 2025, Zhongji Health met the two financial thresholds required to remove the ST warning: first, net assets attributable to shareholders turned positive, reaching 26.1223 million yuan at year-end; second, revenue after deductions reached 488 million yuan, exceeding the 300 million yuan threshold.
However, removing the ST label does not mean returning to profitability. In 2025, Zhongji Health’s net profit attributable to shareholders still showed a loss of 46.2318 million yuan, and net profit excluding non-recurring items showed a loss of 293 million yuan. In other words, the company shed the “*ST” label, but its main business’s cash-generating ability has not yet recovered.
Sales surge and destocking: Revenue crossed the line but profit under pressure
Behind the revenue that crossed the line was a clear “destocking” move: production contracted, inventory fell, and sales increased. 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 surge, the company’s production of bulk tomato paste in that year was only 7,500 tons, down 95.61%, and inventory dropped to 91,000 tons, down 57.80%.
The problem is that this is not a business that becomes more profitable with more sales. According to the company’s corrected data, the gross margin for bulk tomato paste in 2025 was -20.41%, and the overall gross margin was -15.66%. That means the main business, which accounts for over 90% of revenue, is already in a negative gross margin state.
Why sell at a loss: Price decline and shelf life pressure
In its annual report and response to the inquiry letter, Zhongji Health pointed to two core pressures: price and shelf life.
First, price. In the inquiry response, the company mentioned that in 2025, the average export price of Chinese 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 sluggish, with industry inventory at high levels, and some companies dumping at low prices, further exacerbating the downward pressure.
Blue Whale reviewed the company’s annual reports and found that in 2023, the unit sales price of Zhongji Health’s bulk tomato paste was 7,857.91 yuan/ton; it fell to 5,866.22 yuan/ton in 2024; and further dropped to 3,395.43 yuan/ton by 2025. The company stated that the decline in selling prices outpaced the decline in 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, or two years. This means unsold paste would become “dead stock.” In the inquiry response, the company also noted that according to market reality, product prices decline non-linearly with the remaining shelf life, with prices dropping particularly sharply near expiry. With international orders sharply declining, the domestic market nearing saturation, and increasing shelf life pressure, the company had to increase sales of bulk tomato paste, but selling prices continued to fall, resulting in a price-cost inversion.
From a business perspective, selling at a loss is not necessarily a good thing, but it may be the more realistic option: if not sold, inventory continues to tie up capital and faces further price depreciation, impairment, and even expiry risks; if sold, revenue goes up, cash flow and inventory pressure ease, but profit remains under pressure.
Removing ST label does not mean risk cleared: High asset-liability ratio and pre-reorganization progress
However, removing the ST label does not mean risks are cleared. In 2025, Zhongji Health’s asset-liability ratio was still as high as 97.79%, and the company and its wholly-owned subsidiary Red Tomato have also entered the pre-reorganization process.
According to the company’s disclosure, in July 2025, creditor Zhongxingcai Guanghua Accounting Firm (Special General Partnership) filed a petition with the court for reorganization and pre-reorganization of the company, on the grounds that the company is unable to pay off its due debts and lacks solvency but has reorganization value. On the same day, Xinjiang Hengyuan Water Affairs Co., Ltd. also filed a similar petition for the reorganization and pre-reorganization of Red Tomato.
Currently, the company said it is working with the interim manager under the court’s supervision and guidance to advance matters such as creditor claims review, audit, and evaluation. However, pre-reorganization does not mean the court will formally accept the reorganization application. If the court later rules to accept the reorganization, the company’s stock trading may be subject to additional delisting risk warnings; if the reorganization fails and the company is declared bankrupt, the stock will face the risk of being terminated from listing.
In the first quarter of 2026, Zhongji Health achieved operating revenue of 54.8219 million yuan, down 30.33% year-on-year; net profit attributable to shareholders lost 19.6295 million yuan, compared to a loss of 7.2557 million yuan in the same period last year; net profit excluding non-recurring items lost 20.5002 million yuan. By the end of the first quarter, net assets attributable to shareholders had fallen 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 real question remains: when 90% of revenue comes from bulk tomato paste with negative gross margin, after destocking, what else can the company rely on to make money?
