Introduction to this report:
Zhihu's “ecological first” strategy and the second curve of vocational training are clear, and fully embracing AI is expected to enjoy the dividends of the times.
Summary:
Give it an “increase in holdings” rating. Ecology-first, the second curve was established, embracing AI and enjoying the dividends of the times.
Considering the macro environment, the progress of advertising recovery, and vocational education potential, the company will achieve steady loss reduction. It predicts adjusted net profit of -8.10/-282/69 million yuan in 2023-2025, corresponding to PS 1.16X/0.94X/0.80X. Based on the PS valuation method, PS 1.8X in '23 was given, the target price was HK$29.36, relative space +57.87%, covering and giving an “increase in holdings” rating for the first time.
Adhere to the “Ecology First” strategy to achieve sustainable community development. As the largest professional Q&A content community in China, Zhihu has the three major barriers of professional tonality, content diversity, and community attributes. Professional content tuning gathers people in Kochi to drive user growth, PUGC+UGC's diverse content and community building create a unique community ecosystem, and 23Q1 MAU rose to 102.4 million people. In addition, Zhihu supports the rich supply of content for creators through multiple dimensions, “sense of acquisition” content shows strong vitality, and applications such as AI, big data, and cloud technology accelerate the positive cycle of high-quality content circulation.
CCS and member potential are outstanding, and the second curve of vocational training has been established. In 23Q1, the company's revenue from marketing services, membership services, vocational training, and other businesses was 3.92, 4.55, 1.07, and 40 million yuan, compared with -11.70%, +105.16%, +170.58%, +6.35%. The growth rate of advertising and membership was impressive as revenue support and vocational training. Marketing services are under pressure from macro-level influence in the short term, and CCS still has the potential to grow in revenue from high-quality content conversion; the salt selection membership system is becoming more and more perfect, and membership service revenue continues to grow rapidly due to payment penetration; self-employment+mergers and acquisitions of vocational education will rapidly increase to 10.8%, and the revenue share of improving the curriculum system has rapidly increased to 10.8%, which has become the second growth curve for commercialization.
Smart communities embrace AI, and big models and AI education redefine dividends. Zhihu has been deeply involved in AI technology for many years, moving from a Q&A community to an intelligent community. AI applications such as community operation, content recommendation, and algorithm processing have been implemented to unleash the value of quality content. At the same time, Zhihu's massive content library has become a natural corpus of big Chinese models. The launch of the “Zhihai Map AI” big model combined with massive quality content has helped Zhihu seize the AI era. Furthermore, the launch of the “Let's Take AI Course” app has accelerated AI+ education exploration, and the big model is expected to restructure vocational training learning scenarios to drive new growth.
Risk warning: user growth falls short of expectations; commercialization progress falls short of expectations; company loss reduction falls short of expectations; AI application progress falls short of expectations.