Zhihu (2390.HK): “Find Zhihu with Problems”: Scarce Intellectual Communities Accelerating Commercialization

國聯證券 ·  09/25/2022  · Researches

Main points of investment:

With the continuous improvement of the number and duration of users driven by content generalization, Zhihu Inc. 's commercialization is accelerated, and the business income of member business and content commercialization solutions is expected to continue to maintain high growth.

Company profile: the top five comprehensive content communities in China

Founded in 2010, Zhihu Inc. has grown from a small Q & A community with only 200 people to the top five integrated online content communities and the largest online Q & A community in China. Under the eco-first strategy, the company has achieved steady growth in users and commercialized multi-point blossoms. As of 2022H1, the number of users reached 104 million, an increase of + 15.6% over the same period last year. Advertising, paid members, content commercialization solutions and other business revenues accounted for 28.8%, 31.2%, 29.6% and 10.4%, respectively.

Industry: user demand subdivision, vertical community competition pattern stabilized with user scale penetration peaking, Internet community growth driving force from user growth to commercial value release. At present, advertising and paid members are growing rapidly, while the growth potential of e-commerce and training may increase in the future. Although the length of use of short video users has increased year by year in recent years, under the trend of subdivision of user demand, the competition pattern of all kinds of communities is scattered, which has relatively little impact on vertical communities such as Zhihu Inc..

The company's focus: the scarcity of knowledge-based picture and text community, the continuous release of commercial value: 1) the knowledge-based picture-text community is scarce: as the only picture-and-text knowledge community with a MAU of more than 100 million, the company has accumulated many high-quality content with a long life cycle in its twelve years of operation, and has formed the user mind of "looking for Zhihu Inc. with problems", which is scarce in the domestic Internet ecology. 2) the size of users is expected to double: based on the sense of acquisition, the company expands its content to video and pan-entertainment, thus promoting the steady growth of users, and MAU is expected to reach 220 million in 2027. 3) accelerated commercialization: with the growth of the size of users, the value of corporate advertising is expected to be accelerated, while member payment, vocational training, content e-commerce and other multiple commercialization approaches are expected to be gradually clear.

Earnings forecast, valuation and rating

It is estimated that the income of the company from 22 to 24 years is 38.2max 53.8 / 7.41 billion yuan respectively, the net profit of Non-GAAP is-15.1 Compay 9.3 / 19 million RMB, and the corresponding Non-GAAPEPS is-4.65 Compact 2.85 max 0.06 RMB / share respectively.

Considering that the company is not yet profitable, with reference to the comparable company valuation, the company is given a valuation multiple of 2.3x PS,83 / MAU in 2022, corresponding to a target price of 27 yuan (HK $31.20), with a "buy" rating for the first time.

Risk tips: macroeconomic slowdown risk, content regulation risk, core user loss risk and so on.

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