SGX Market Observation: Zhongji Health Still Losses After Removing ST Label, Destocking 'Sell More, Lose More'

On June 29, Zhongji Health removed its ST label and resumed trading, with the 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 per share, up 2.17% from the closing price of 3.22 yuan on June 25.

Zhongji Health is located in Wujiaqu, Xinjiang, and mainly produces tomato products, including bulk tomato paste, small-package tomato products, and lycopene soft capsules. The company's main revenue comes from bulk tomato paste, which is primarily used as a basic ingredient in food processing and catering supply chains, sold mainly to B-end customers.

Removing ST Label Crosses Two Financial Hurdles, but Core Business Still Bleeding

Previously, the company was tagged with '*ST' due to hitting the financial delisting risk warning red line: in 2024, total profit, net profit, and non-recurring net profit were all negative, revenue after deductions was below 300 million yuan, and net assets attributable to shareholders were negative.

By 2025, Zhongji Health crossed the two thresholds needed to lift the delisting risk warning: shareholders' equity attributable to the parent company turned positive, reaching 26.1223 million yuan at year-end; revenue after deductions reached 488 million yuan, above the 300 million yuan red line.

But removing the ST label does not mean a return to profitability. In 2025, net profit attributable to shareholders was still a loss of 46.2318 million yuan, non-recurring net profit was a loss of 293 million yuan, and the core business's ability to generate cash remains unhealed.

Using Destocking to Exchange for Revenue: Sales Volume Soars, but Production and Inventory Shrink Simultaneously

According to the annual report, the company clearly 'destocked': production shrank, inventory declined, and sales volume increased. In 2025, bulk 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 production volume of bulk tomato paste that year was only 7,500 tons, down 95.61%, and inventory fell to 91,000 tons, down 57.80%.

Although revenue 'passed the line' through higher sales volume, this is not a business that becomes more profitable with more sales. According to corrected data, the gross margin for bulk tomato paste in 2025 was -20.41%, and the overall gross margin was -15.66%. In other words, the main business that accounts for over 90% of revenue is already in a state of negative gross profit.

Pressure to Sell at a Loss: Price Decline and Shelf Life Induce Non-linear Devaluation

In the annual report and reply to the inquiry letter, Zhongji Health pointed to two core pressures: price and shelf life.

First, price. The reply to the inquiry letter mentioned that the average export price of Chinese tomato paste (over 5kg) fell to $675 per ton in 2025, down 32.5% from $1,000 per ton in 2024, hitting a recent low. Domestic prices for bulk tomato paste also remained low, with high industry inventory, and some companies' low-price selling further exacerbated downward price pressure.

Blue Whale Journal reviewed the company's annual report data: the average selling price of bulk tomato paste dropped from 7,857.91 yuan/ton in 2023 to 5,866.22 yuan/ton in 2024, and further fell to 3,395.43 yuan/ton in 2025. The company said that the decline in selling prices outpaced the decline in costs, creating a situation where 'the more you sell, the more you lose.'

Second, shelf life pressure. The company disclosed that the shelf life of bulk tomato paste is 720 days (two years). If unsold, it risks becoming a dead loss. The company stated that based on market sales reality, the price of tomato products declines non-linearly with remaining shelf life, with prices dropping sharply as the shelf life nears expiration. In the context of a sharp decline in international orders, near-saturation in the domestic market, and increasing shelf life pressure, the company must boost sales volume, but selling prices continue to fall, creating a situation where selling prices and production costs are inverted.

From an operational perspective, selling at a loss may be a choice among realistic options: if not sold, inventory will continue to tie up capital and may face further price drops, impairment, or even expiration risks; if sold, revenue and cash flow pressures can be alleviated, but profit remains under pressure.

Pre-restructuring and Financial Pressure: Still May Face Delisting Risk Warning After Removing ST

However, removing the ST label does not mean risks are cleared. In 2025, the 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 procedures.

According to disclosures, in July 2025, creditor Zhongxingcai Guanghua Certified Public Accountants (Special General Partnership) applied to the court for restructuring and pre-restructuring of the company on the grounds that the company was unable to pay due debts and was clearly lacking in solvency but had restructuring value. On the same day, Xinjiang Hengyuan Water Service Co., Ltd. also filed similar applications for Restructuring and pre-restructuring of Red Tomato.

The company said it is working with the temporary administrator under court supervision to advance matters such as reviewing claims, auditing, and evaluation. However, pre-restructuring does not mean the court will definitely accept the restructuring application. If the court later decides to accept the restructuring, the stock may be subject to an additional delisting risk warning; if restructuring fails and the company is declared bankrupt, the stock will also face termination of listing.

In the first quarter of 2026, the company 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; non-recurring net profit was a loss of 20.5002 million yuan. By the end of the first quarter, shareholders' equity attributable to the parent 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, resumption of trading is only a temporary exit from the '*ST' label. The core issue remains: after destocking, what can the company rely on to achieve profitability?