Tomato Paste De-stocking Still Losses: Zhongji Health Resumption and Price-Sales Inversion

Image source: Visual China

Blue Whale News, June 29 (Reporter Dai Ziting) On June 29, Zhongji Health resumed trading after its ST designation was removed, with its stock abbreviation changed from '*ST Zhongji' to 'Zhongji Health'. On the first day of resumption, as of press time, Zhongji Health shares were trading at 3.29 yuan per share, up 2.17% from the close of 3.22 yuan on June 25.

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

It is this less 'mainstream' bulk tomato paste that supported Zhongji Health's 2025 revenue, but also dragged down the company's profit.

Removing ST Crosses Financial Hurdles, but Profit Recovery Still Insufficient

Zhongji Health had previously been tagged with the '*ST' designation due to financial-based delisting risk warnings: in 2024, the company's total profit, net profit, and non-recurring net profit were all negative, and its revenue after deductions was below 300 million yuan, while net assets attributable to shareholders were also negative. According to Shenzhen Stock Exchange listing rules, the stock was therefore marked '*ST'.

By 2025, Zhongji Health crossed the two financial thresholds required to remove the delisting risk warning: first, shareholders' equity attributable to the parent 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, this does not mean the company has returned to profitability. In 2025, net profit attributable to shareholders of the parent was still a loss of 46.2318 million yuan, while non-recurring net profit was a loss of 293 million yuan. In other words, the company removed the '*ST' label, but its core business has not yet recovered.

De-stocking for Revenue: Sales Surge While Production Plunges

Behind the revenue that exceeded the threshold is a clear 'de-stocking' move: production shrank, 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 reached 132,100 tons, up 249.47% year-on-year. Corresponding to the sales surge, the company's bulk tomato paste production volume was only 7,500 tons, down 95.61% year-on-year, and inventory fell to 91,000 tons, down 57.80% year-on-year.

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, accounting for over 90% of revenue, is selling at a negative gross margin.

Reasons for Selling at a Loss: Price Decline and Shelf-Life Pressure

The company's explanations in the annual report and response to the inquiry letter point to two core pressures: price and shelf life.

First, price. In its inquiry response, the company mentioned that the average export price of Chinese tomato paste above 5kg fell to US$675 per ton in 2025, down 32.5% from US$1,000 per ton in 2024, hitting a multi-year low. Domestic bulk tomato paste prices also remained weak, with industry inventory high, and some enterprises selling at low prices further exacerbating price downward pressure.

Blue Whale News review of the company's annual report found that in 2023, Zhongji Health's bulk tomato paste unit sales price reached 7,857.91 yuan per ton; in 2024 it fell to 5,866.22 yuan per ton; and by 2025 it further dropped to 3,395.43 yuan per ton. The company said the decline in product sales prices exceeded the cost reduction, creating a situation of 'the more you sell, the more you lose'.

Second, shelf life. Zhongji Health's annual report disclosed that bulk tomato paste has a shelf life of 720 days, i.e., two years. This means unsold bulk tomato paste would become a dead loss. In its inquiry response, the company also mentioned that based on actual sales experience of tomato products, product prices decline non-linearly with shelf life, with prices falling particularly sharply near the end of shelf life. Against the backdrop of sharply reduced international orders, a near-saturated domestic market, and increasing shelf-life pressure, the company had to boost bulk tomato paste sales, but sales prices continued to fall, resulting in a production-sales price inversion.

From an operational perspective, selling at a loss is not good, but it may be the more realistic choice at the moment. If not sold, inventory continues to tie up capital and may face further price drops, impairment, or even expiration risk; if sold, revenue increases, cash flow and inventory pressure ease, but profit remains under pressure.

Risks Persist After Resumption: High Debt Ratio, Red Tomato Enters Pre-Restructuring

However, removing the ST tag does not mean risk is cleared. In 2025, Zhongji Health's debt-to-asset ratio was still as high as 97.79%, and the company and its wholly-owned subsidiary Red Tomato have entered pre-restructuring proceedings.

According to company filings, in July 2025, Zhongji Health creditor Zhongsheng Caikuang Certified Public Accountants (Special General Partnership) applied to the court for restructuring and pre-restructuring of the company, citing its inability to repay due debts and obvious lack of solvency, but with restructuring value. On the same day, Xinjiang Hengyuan Water Co., Ltd. also applied for restructuring and pre-restructuring of Red Tomato on similar grounds.

Currently, the company said it is working with the interim administrator under court supervision to advance creditor claims review, auditing, and valuation. However, pre-restructuring does not mean the court will formally accept the restructuring petition. If the court later rules to accept the restructuring, the company's stock may be subject to an additional delisting risk warning; if restructuring fails and bankruptcy is declared, the stock may face termination of listing.

On June 29, Blue Whale News contacted Zhongji Health by phone and email regarding related issues, but received no response as of press time.

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 parent was a loss of 19.6295 million yuan, compared with a loss of 7.2557 million yuan in the same period last year; non-recurring net profit was a loss of 20.5002 million yuan. By the end of the first quarter, the company's shareholders' equity attributable to parent fell to 6.4928 million yuan, down 75.14% from 26.1223 million yuan at end of 2025.

For Zhongji Health, resumption only temporarily sheds the '*ST' label. The real question remains: when 90% of revenue comes from bulk tomato paste with negative gross margins, what can the company rely on to make money after de-stocking?