B-Share Focus: Zhongji Health Still Losses After ST Removal, Tomato Paste Inventory Clearance at Cost of Sales Weighs

On June 29, Zhongji Health resumed trading after ST removal, with the stock name changed from "*ST Zhongji" to "Zhongji Health." On the first day after resumption, as of press time, the stock price was CNY 3.29 per share, up 2.17% from the closing price of CNY 3.22 on June 25.

Zhongji Health, located in Wujiaqu, Xinjiang, primarily processes tomato products including bulk tomato paste, small-pack tomato products, and lycopene soft capsules. The bulk of revenue comes from bulk tomato paste, which serves as a basic raw material for food processing and catering supply chains, mainly sold to B-end clients.

Behind ST Removal: Financial Thresholds Crossed but Main Business Profitability Not Yet Restored

Previously, the "*ST" designation arose from financial delisting risk warning red lines: in 2024, all total profit, net profit, and non-recurring net profit were negative, and revenue after deductions was below CNY 300 million, with net assets attributable to shareholders negative.

In 2025, the company crossed two financial thresholds needed to remove the ST risk: owners' equity attributable to shareholders turned positive, ending the year at CNY 26.1223 million; and revenue after deductions reached CNY 488 million, above the CNY 300 million red line.

However, the company still failed to achieve profitability in 2025: net profit attributable to shareholders was a loss of CNY 46.2318 million, and non-recurring net profit loss was CNY 293 million. In other words, after removing the "*ST" label, core business profitability remains under pressure.

Inventory Clearance at Cost of Sales: Bulk Tomato Paste Sales Up but Production Down, Inventory Down

Annual report shows in 2025, Zhongji Health's bulk tomato paste revenue was CNY 448 million, 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, and inventory fell to 91,000 tons, down 57.80% YoY.

At the operational level, selling at a loss does not mean profit improvement. The company's corrected data shows that in 2025, bulk tomato paste gross margin was -20.41%, and overall gross margin was -15.66%. Thus, the main business accounting for over 90% of revenue is already in negative gross margin territory.

Two Major Pressures for Selling at a Loss: Price Decline and 720-Day Shelf Life Forcing Sales

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

On price, the company stated in the reply that in 2025, China's export average price of tomato paste over 5 kg dropped to USD 675 per ton, down 32.5% from USD 1,000 per ton in 2024, hitting a recent low. Domestic bulk tomato paste prices also remained depressed, with high industry inventory and some enterprises offloading at low prices exacerbating the decline.

Blue Whale reporter reviewed the annual report and found that the average selling price of bulk tomato paste fell from CNY 7,857.91 per ton in 2023 to CNY 5,866.22 in 2024, and further to CNY 3,395.43 in 2025. The company said the decline in selling prices exceeded the cost reduction, creating a situation of "selling more, losing more."

On shelf life, the company disclosed bulk tomato paste has a shelf life of 720 days. Undisposed inventory becomes a liability. In the reply, the company also noted that based on market reality, product prices decline non-linearly as shelf life approaches, with particularly sharp declines near expiry. Amid reduced international orders, near-saturation in domestic market, and shelf life pressure, the company must increase sales, but selling prices continue to drop, resulting in a price inversion.

ST Removal Does Not Equal Risk Clearance: High Asset-Liability Ratio, Pre-Restructuring Ongoing

In 2025, the company's asset-liability 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 disclosure, in July 2025, creditor Zhongxing Caiguanghua Certified Public Accountants (Special General Partnership) filed a petition with the court for restructuring and pre-restructuring of Zhongji Health on the grounds that the company is unable to pay due debts and lacks solvency but has restructuring value. On the same day, Xinjiang Hengyuan Water Supply Co., Ltd. also filed a petition for restructuring and pre-restructuring of Red Tomato on similar grounds.

The company said it is working with the interim administrator under court supervision to advance debt verification, audit, and valuation. Note that pre-restructuring does not mean the court will formally accept the restructuring application. If the court later accepts restructuring, the company's stock may be subject to additional delisting risk warnings; if restructuring fails and bankruptcy is declared, the stock may face termination of listing.

In Q1 2026, Zhongji Health achieved revenue of CNY 54.8219 million, down 30.33% YoY; net profit attributable to shareholders was a loss of CNY 19.6295 million, compared to a loss of CNY 7.2557 million in the same period last year; non-recurring net profit loss was CNY 20.5002 million. By quarter-end, owners' equity attributable to shareholders fell to CNY 6.4928 million, down 75.14% from CNY 26.1223 million at end-2025.

For Zhongji Health, resumption is only a temporary emergence from the "*ST" label. The key question is: when 90% of revenue comes from bulk tomato paste with negative gross margins, what can the company rely on for profitability and improvement after inventory clearance?