Tomato Paste Inventory Clearance Leads to Loss; Zhongji Health Resumes Trading After ST Removal

On June 29, Zhongji Health resumed trading after the ST removal, with its stock abbreviation changed from “*ST Zhongji” to “Zhongji Health.” On the first day of resumption, as of press time, Zhongji Health's stock price was reported at 3.29 yuan per share, up 2.17% from the closing price of 3.22 yuan per share on June 25.

Zhongji Health, based in Wujiaqu, Xinjiang, is primarily engaged in tomato products, including large drum tomato paste, small packaged tomato products, and lycopene soft capsules. Unlike the small ketchup bottles familiar to ordinary consumers, the company's main revenue comes from large drum tomato paste, which is more commonly used as a basic ingredient in food processing and catering supply chains, mainly sold to B-end customers.

It is this large drum tomato paste, which is not very well-known, that underpinned Zhongji Health's revenue in 2025, but also dragged down the company's profits.

Zhongji Health had previously been under “*ST” status, triggered by financial delisting risk warnings: In 2024, total profit, net profit, and non-recurring net profit were all negative, deducting revenue below 300 million yuan, and net assets attributable to shareholders of the listed company were negative. According to the Shenzhen Stock Exchange listing rules, the company's stock was accordingly labeled “*ST.”

By 2025, Zhongji Health had crossed the two financial thresholds required for removal of the delisting risk warning: First, the net equity attributable to shareholders of the listed company turned positive, reaching 26.1223 million yuan at year-end; second, the deductive revenue reached 488 million yuan, exceeding the 300 million yuan threshold.

However, this does not mean the company has returned to profitability. In 2025, net profit attributable to shareholders of the listed company was still a loss of 46.2318 million yuan, while non-recurring net profit loss was 293 million yuan. In other words, the company removed the “*ST” label, but its main business self-sustaining ability has not yet recovered.

Supporting the revenue crossing the line was the company's obvious “inventory clearance” action: reduced production, decreased stock, and increased sales. According to the annual report, in 2025, Zhongji Health's large drum 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 surge in sales, the company's production volume of large drum tomato paste that year was only 7,500 tons, down 95.61% year-on-year; inventory dropped to 91,000 tons, down 57.80%.

The problem is that this is not a business that makes more money by selling more. According to the company's corrected data, in 2025, the gross margin of large drum tomato paste was -20.41%, and the overall gross margin was -15.66%. In other words, the main business, which accounts for over 90% of revenue, is already in a state of negative gross margin.

“Selling more, losing more”: Dual pressure from price and shelf life

Why sell at a loss knowing it's losing money?

In its annual report and reply to the inquiry letter, Zhongji Health explained two core pressures — price and shelf life.

First, price. In the reply, the company said that in 2025, the average export price of tomato paste above 5 kg in China fell to $675 per ton, down 32.5% from $1,000 per ton in 2024, hitting a new low in recent years. Domestic large drum tomato paste prices also remained low, with industry inventory at high levels, and some companies selling at low prices further exacerbated the downward pressure.

Blue Whale reporters combing through the company's annual reports found that in 2023, the unit price of Zhongji Health's large drum tomato paste once reached 7,857.91 yuan per ton; in 2024 it fell to 5,866.22 yuan per ton; and in 2025 further dropped to 3,395.43 yuan per ton. The company stated that the decline in product sales prices was greater than the decline in costs, creating a situation of “selling more, losing more.”

Second, shelf life. Zhongji Health's annual report disclosed that the shelf life of large drum tomato paste is 720 days, i.e., two years. This means that if the large drum tomato paste cannot be sold, it will be “stuck in hand.” In the reply to the inquiry letter, the company also mentioned that based on actual market sales of tomato products, product prices show a non-linear downward trend with shelf life, and the price decline is particularly severe near the end of shelf life. Against the backdrop of a sharp decline in international orders, a near-saturation of the domestic market, and increased shelf life pressure, the company had to increase sales of large drum tomato paste, but sales prices continued to fall, resulting in a reversal between production and sales prices.

From a business perspective, selling at a loss is not good, but it may be a more realistic choice at present. If not sold, inventory continues to tie up funds and may face further price drops, impairments, or even near-expiry risks; if sold, revenue increases, cash flow and inventory pressure ease, but profit margins still remain under pressure.

Removing ST does not mean risk cleared: High debt ratio, entering pre-restructuring

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

According to the company's disclosure, in July 2025, Zhongji Health's creditor, Zhongxing Caiguang Huatai Certified Public Accountants (Special General Partnership), filed an application with the court for restructuring and pre-restructuring of the company, citing that the company is unable to pay due debts and lacks solvency but has restructuring value. On the same day, Xinjiang Hengyuan Water Services Co., Ltd. also filed a similar application for restructuring and pre-restructuring of Hongse Tomato.

Currently, the company stated that it is working with the interim management team under the court's supervision and guidance to advance matters such as claims review, audit, and evaluation. However, pre-restructuring does not mean the court will formally accept the restructuring application. If the court later rules to accept the restructuring, the company's stock trading may be subject to an additional delisting risk warning; if restructuring fails and the company is declared bankrupt, the stock may face termination of listing.

Pressure continues after resumption: Q1 2026 still loss

In the first quarter of 2026, Zhongji Health achieved revenue of 54.8219 million yuan, down 30.33% year-on-year; net profit attributable to shareholders of the listed company was a loss of 19.6295 million yuan, compared to a loss of 7.2557 million yuan in the same period last year; non-recurring net profit loss was 20.5002 million yuan. By the end of the first quarter, the net equity attributable to shareholders of the listed company fell to 6.4928 million yuan, a decrease of 75.14% from 26.1223 million yuan at the end of 2025.

For Zhongji Health, resuming trading is only a temporary exit from the “*ST” label. The real question to answer remains: When 90% of revenue comes from large drum tomato paste with negative gross margin, after inventory clearance, what can the company rely on to make money?