Zhongji Health Removes *ST Resumes Trading: Sales Surge but Core Business Gross Margin Negative
On June 29, Zhongji Health removed its *ST label and resumed trading, changing its stock abbreviation from "*ST Zhongji" to "Zhongji Health." On the first day back, as of press time, the stock traded at 3.29 yuan per share, up 2.17% from the close of 3.22 yuan on June 25.
Located in Wujiaqu, Xinjiang, Zhongji Health mainly produces tomato products, including bulk tomato paste, small-pack tomato products, and lycopene soft capsules. The bulk tomato paste segment accounts for the bulk of revenue and primarily serves B-end clients as a basic ingredient for food processing and catering supply chains.
Bulk tomato paste drove revenue in 2025 but also weighed on profits.
The company was previously flagged with a *ST label due to financial-based delisting risk: in 2024, total profit, net profit, and recurring net profit were all negative, and revenue after deducting was below 300 million yuan, and net assets attributable to shareholders were negative.
In 2025, Zhongji Health crossed the two financial thresholds required for removing the *ST label: equity attributable to shareholders turned positive at 26.12 million yuan at year-end; and deducted revenue reached 488 million yuan, above the 300 million yuan threshold.
However, removing *ST does not mean returning to profitability. In 2025, net profit attributable to shareholders still recorded a loss of 46.23 million yuan, and recurring net profit lost 293 million yuan. In other words, the core business's cash-generating ability has not yet recovered.
Destocking: Surge in Sales, Decline in Production & Inventory
Behind the revenue line was a clear "destocking" effort: production shrank, inventory fell, and sales increased. 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, production volume was only 7,500 tons, down 95.61% YoY; inventory dropped to 91,000 tons, down 57.80% YoY.
However, this is not a business that makes more money by selling more. According to corrected data, the gross margin for bulk tomato paste in 2025 was -20.41%, and the overall gross margin was -15.66%. That is, the main business contributing over 90% of revenue operated at a negative gross margin.
Reasons for "Selling at a Loss": Price Decline & 720-Day Shelf Life
In the annual report and response to the inquiry letter, the company pointed to two core pressures: price and shelf life.
On price, the company noted that in 2025, China's export price for tomato paste over 5 kg fell to US$675/ton, down 32.5% from US$1,000/ton in 2024, hitting a recent low. Domestic bulk tomato paste prices also remained depressed, with high industry inventories and some companies selling at low prices, further pressuring prices.
Blue Whale News noted from the annual report that the average selling 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 that selling prices fell more than costs, creating a situation of "the more you sell, the more you lose."
On shelf life, the annual report disclosed that bulk tomato paste has a shelf life of 720 days, i.e., two years. Failure to sell means it becomes worthless. The company also noted in its inquiry response that based on actual market conditions, product prices decline non-linearly with remaining shelf life, with steep drops near expiry. Amid a sharp drop in international orders, near-saturation of the domestic market, and increasing shelf-life pressure, the company increased sales, but selling prices continued to fall, resulting in a negative price-cost spread.
From a business perspective, selling at a loss is not ideal, but may be the more practical choice at present: not selling ties up funds and risks further price drops, impairment, or expiry; selling relieves cash flow and inventory pressure, but still drags on profits.
*ST Removal Does Not Mean Risk Cleared: High Debt Ratio, Pre-Reorganization Underway
Despite removing *ST, risks remain. In 2025, the company's debt-to-asset ratio was as high as 97.79%, and the company and its wholly-owned subsidiary Red Tomato have entered a pre-reorganization process.
The company disclosed that in July 2025, creditor Zhongxingcai Guanghua Certified Public Accountants (Special General Partnership) filed a petition with the court for reorganization and pre-reorganization of the company, citing its inability to pay due debts and apparent lack of solvency, but with reorganization value. On the same day, Xinjiang Hengyuan Water Co., Ltd. filed a similar petition for Red Tomato.
Currently, the company said it is working with the provisional administrator under court supervision to advance creditor reviews, audits, and evaluations. However, pre-reorganization does not mean the court will formally accept the reorganization petition. If the petition is accepted and reorganization fails or the company is declared bankrupt, the stock may face delisting.
In the first quarter of 2026, the company reported revenue of 54.82 million yuan, down 30.33% YoY; net loss attributable to shareholders was 19.63 million yuan, compared with a loss of 7.26 million yuan in the same period last year; recurring net loss was 20.50 million yuan. By end of Q1, shareholders' equity fell to 6.49 million yuan, down 75.14% from 26.12 million yuan at end-2025.
For Zhongji Health, resuming trading only temporarily sheds the *ST label. The core problem remains: when 90% of revenue comes from a bulk tomato paste with negative gross margin, what will the company rely on for profitability after destocking?
