Zhongji Health resumes trading after *ST removal: ketchup inventory clearance for revenue but still loss-making
June 29, Zhongji Health resumes trading after *ST removal. The stock short name changed from '*ST Zhongji' to 'Zhongji Health'. On the first day of resumption, as of press time, the stock was trading at 3.29 yuan per share, up 2.17% from the closing price of 3.22 yuan on June 25.
Zhongji Health is based in Wujiaqu, Xinjiang, and mainly produces tomato products, including bulk ketchup, small-pack tomato products, and lycopene soft capsules. Unlike common small-bottle products for end consumers, the company's revenue mainly comes from bulk ketchup, sold as an ingredient to B-end clients in food processing and catering supply chains.
2025 crossed financial thresholds but core profitability yet to recover
Previously, the company was '*ST' due to financial-based delisting risk warnings: in 2024, total profit, net profit, and deducting non-recurring net profit were all negative, and revenue after deductions was below 300 million yuan, with net assets attributable to shareholders negative.
In 2025, the company crossed two thresholds: owners' equity attributable to shareholders turned positive to 26.1223 million yuan at year-end; revenue after deductions reached 488 million yuan, above the 300 million yuan red line.
But the company still did not achieve profitability. In 2025, net profit attributable to shareholders was a loss of 46.2318 million yuan, and deducting non-recurring net profit was a loss of 293 million yuan. In other words, the '*ST' label was removed, but core profitability still needs repair.
Bulk ketchup 'selling more' but destocking is significant with negative gross margin
While supporting revenue above the line, the company adopted a clear 'destocking' approach: production contraction, inventory decline, and sales increase. The annual report shows that in 2025, bulk ketchup revenue was 448 million yuan, accounting for 91.12% of total revenue; sales volume was 132,100 tons, up 249.47% year-on-year. In contrast, production was only 7,500 tons, down 95.61% year-on-year; inventory dropped to 91,000 tons, down 57.80% year-on-year.
The problem is that this is not 'the more you sell, the more you profit'. Corrected data show that the gross margin for bulk ketchup in 2025 was -20.41%, and the overall gross margin was -15.66%. That is, the main business accounting for over 90% of revenue is at a negative gross profit.
Selling at a loss: price decline and 720-day shelf-life cause inversion
In the annual report and responses to inquiry letters, the company explained two core pressures: price and shelf life.
Price-wise, the company noted that in 2025, China's export price of ketchup (5kg+) fell to $675 per ton, down 32.5% from $1,000 per ton in 2024, hitting a recent low. Domestic bulk ketchup prices have also been depressed, with high industry inventory and some companies selling at low prices, further exacerbating the decline.
Blue Whale reporters reviewed the annual report and found that the sales unit price of bulk ketchup 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 the decline in product selling prices exceeded the decline in costs, creating a situation of 'the more you sell, the more you lose'.
Shelf life: the company disclosed that bulk ketchup has a shelf life of 720 days, meaning unsold stock risks being stuck. The company indicated that product prices decline non-linearly with shelf life, with prices for near-expiry products dropping sharply. Given sharp declines in international orders, near-saturation in domestic markets, and increased shelf-life pressure, the company needs to boost sales, but selling prices continue to fall, creating a price inversion.
From an operational standpoint, selling at a loss is not necessarily optimal, but may be more realistic: not selling will continue to tie up capital and face further price drops, impairment, and expiry risks; selling can relieve cash flow and inventory pressure, but profits remain under pressure.
After *ST removal, risks remain: pre-reorganization process, delisting and bankruptcy concerns
Removal of *ST does not mean risk clearance. As of 2025, the company's debt-to-asset ratio was still 97.79%, and the company and its wholly-owned subsidiary Red Tomato have entered pre-reorganization procedures.
According to disclosures, in July 2025, creditor Zhongxingcai Guanghua Accounting Firm (special general partnership) applied for reorganization and pre-reorganization of the company on the grounds that it cannot pay off due debts and obviously lacks repayment ability but has reorganization value. On the same day, Xinjiang Hengyuan Water Services Co., Ltd. also applied for reorganization and pre-reorganization of Red Tomato on similar grounds.
The company said it is working with the interim administrator under court supervision and guidance to advance debt review, audit, and valuation. However, pre-reorganization does not mean the court will accept the reorganization application. If the court later rules to accept reorganization, the stock may be subject to additional delisting risk warnings; if reorganization fails and bankruptcy is declared, the stock faces delisting risk.
Q1 2026 still loss-making, owners' equity continues to decline
In Q1 2026, Zhongji Health achieved revenue of 54.8219 million yuan, down 30.33% year-on-year; net profit attributable to shareholders was a loss of 19.6295 million yuan, compared to a loss of 7.2557 million yuan in the same period last year; deducting non-recurring net profit was a loss of 20.5002 million yuan. By the end of Q1, owners' equity attributable to shareholders 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 only temporarily removes the '*ST' label. The core issue remains: when 90% of revenue comes from bulk ketchup with negative gross margin, what will the company rely on to achieve profitability after destocking?
