Zhongji Health removes delist warning and resumes: tomato paste destocking still selling at loss, pre-restructuring risk remains

Blue Whale News, June 29 (Reporter Dai Ziting) On June 29, Zhongji Health removed its delist warning and resumed trading, with stock abbreviation changed from "*ST Zhongji" to "Zhongji Health". On the first day of resumption, as of press time, the stock price was 3.29 yuan/share, up 2.17% from 3.22 yuan/share at close on June 25.

Zhongji Health, based in Wujiaqu, Xinjiang, primarily engages in tomato products, including large drum tomato paste, small pack tomato products, and lycopene soft capsules. The bulk of revenue comes from large drum tomato paste, a basic ingredient for food processing and catering supply chains, mainly sold to B-end clients.

This "less visible" large drum tomato paste supported the company's 2025 revenue but also dragged its profits.

Conditions met for removal but main business profitability not restored

Zhongji Health had previously been "*ST" due to financial delisting risk: in 2024, total profit, net profit, and recurring net profit were all negative, revenue after deductions was below 300 million yuan, and net assets attributable to shareholders were negative.

In 2025, the company cleared two financial thresholds required for delist warning removal: shareholders' equity attributable to parent turned positive to 26.12 million yuan at year-end; revenue after deductions reached 488 million yuan, above the 300 million yuan threshold.

But the company still hasn't restored profitability. In 2025, net profit attributable to parent remained a loss of 46.23 million yuan, recurring net loss of 293 million yuan. That is, the "*ST" label is removed, but main business cash-generating ability hasn't recovered.

Destocking drives sales volume surge: production and inventory both decline

Annual report shows the company supported revenue crossing the threshold through clear "destocking": production contraction, inventory decline, sales increase. In 2025, large drum tomato paste revenue was 448 million yuan, 91.12% of total revenue; sales volume 132,100 tons, up 249.47% YoY.

The big sales jump corresponded to production shrinkage and inventory drop: production volume was only 7,500 tons, down 95.61% YoY; inventory fell to 91,000 tons, down 57.80% YoY.

Sales increase doesn't mean profit: large drum paste gross margin negative

But this is not "a business that makes more money the more you sell." According to corrected data, 2025 large drum paste gross margin was -20.41%, overall company gross margin -15.66%. That means over 90% of revenue source is already at negative gross margin.

Explanation for selling at a loss: price decline and shelf-life pressure

In the annual report and reply to inquiry letter, the company cites two core pressures: price and shelf life.

Price-wise, the company noted that China's export price of tomato paste above 5kg fell to 675 USD/ton in 2025, down 32.5% from 1000 USD/ton in 2024, a multi-year low. Domestic large drum paste prices also remained depressed, with high industry inventory and some firms dumping, further pressuring prices.

Blue Whale reporter reviewing the annual report found that large drum paste unit sales price dropped from 7857.91 yuan/ton in 2023 to 5866.22 yuan/ton in 2024, and further to 3395.43 yuan/ton in 2025. The company said product price decline exceeded cost reduction, creating a "sell more, lose more" situation.

Shelf-life wise, large drum paste has a shelf life of 720 days (two years). If unsold, there is risk of "stuck on hands." In the inquiry reply, the company also mentioned that product price declines nonlinearly with remaining shelf life, with especially sharp drops near expiry. Amid shrinking international orders, near-saturated domestic market, and increasing shelf-life pressure, the company had to boost large drum paste sales, but selling prices kept falling, resulting in price inversion.

Operationally, selling at a loss is not ideal, but may be the more realistic option: not selling would continue tying up funds and risk further price drops, impairment, or expiry; selling relieves cash flow and inventory pressure, but profit remains under pressure.

Removing label ≠ risk clearance: debt ratio high, pre-restructuring underway

However, removing the delist warning does not mean risk clearance. In 2025, Zhongji Health's debt ratio was still 97.79%; the company and its wholly-owned subsidiary "Red Tomato" have entered pre-restructuring proceedings.

According to disclosure, in July 2025, Zhongxingcai Guanghua CPAs (special general partnership) petitioned the court for restructuring and pre-restructuring of the company on grounds of being unable to pay due debts and clearly lacking solvency, but having restructuring value. On the same day, Xinjiang Hengyuan Water Services also petitioned similarly for "Red Tomato."

The company said it is working with the interim administrator under court supervision to advance creditor review, audit, and evaluation. However, pre-restructuring does not mean the court will definitely accept a restructuring application. If the court later accepts restructuring, stock trading may face delisting risk warning; if restructuring fails and bankruptcy is declared, the stock faces termination of listing.

In Q1 2026, the company realized revenue of 54.82 million yuan, down 30.33% YoY; net profit attributable to parent loss of 19.63 million yuan, compared to loss of 7.26 million yuan in the same period last year; recurring net loss of 20.50 million yuan. By end of Q1, shareholders' equity attributable to parent fell to 6.49 million yuan, down 75.14% from 26.12 million yuan at end-2025.

For Zhongji Health, resumption is just a temporary exit from the "*ST" label. The core issue remains: when about 90% of revenue comes from negative-margin large drum paste, after destocking, what can the company rely on to achieve profitability?