Zhihu (ZH US) Company Update Summary
Core Content
This document provides a detailed analysis of Zhihu's financial performance and outlook for the first quarter of 2022 (1Q22), as well as its financial projections for the following years (FY22-24E). The report highlights the company's resilience in the face of the ongoing epidemic and market transition, and includes key financial metrics, revenue breakdowns, and investment ratings.
Main Points
1Q22 Financial Performance
- Revenue: Increased by +55% YoY, 3% above consensus and 3% above estimates.
- MAU (Monthly Active Users): Grew by +19% YoY, largely in line with expectations.
- Non-GAAP Net Loss: RMB367 million, better than consensus and estimates.
- GPM (Gross Profit Margin): 45%, 4 percentage points above consensus, indicating strong cost control and efficiency.
- Paid Membership Revenue: +75% YoY, 6% below estimates, suggesting continued growth despite challenges.
Revenue Breakdown by Segment
- Content-Commerce Solutions (CCS): +88% YoY, 7% above estimates, driven by higher brand engagement and defensive verticals.
- Advertising Revenue: +2% YoY, in line with estimates.
- Paid Membership: +75% YoY, 6% below estimates.
- Others: +352% YoY, indicating strong growth in other areas.
2Q22E Outlook
- MAU: Expected to rise +4% QoQ to 105 million.
- Revenue: Forecasted to grow +30% YoY, with CCS and ads revenue increasing +10% YoY.
- Paid Membership Revenue: +69% YoY, more resilient to the epidemic.
- GPM: Expected to remain stable at 45%.
- Adj. OPM (Operating Profit Margin): -56%, reflecting challenges in monetization due to lockdown disruptions.
Revenue Growth Forecast
| Year |
Revenue (RMB mn) |
YoY Growth (%) |
| FY22E |
4,009 |
35.5 |
| FY23E |
5,685 |
41.8 |
| FY24E |
7,524 |
32.3 |
Adjusted Net Profit Forecast
| Year |
Adj. Net Profit (RMB mn) |
YoY Growth (%) |
| FY22E |
(1,710) |
-49.4 |
| FY23E |
(1,521) |
-11.0 |
| FY24E |
582 |
32.3 |
Adjusted Net Margin
- FY22E: -42.7%
- FY23E: -26.8%
- FY24E: -7.7%
P/S (Price-to-Sales) Ratio
- FY22E: 1.3
- FY23E: 0.9
- FY24E: 0.7
Target Price and Recommendation
- Target Price (TP): US$4.5 (down from previous TP of US$5.5).
- Recommendation: BUY, indicating potential for +231% return over the next 12 months.
Analysts
Key Information
Market Capitalization
Shareholding Structure
| Holder |
% Ownership |
| Yiheng Capital |
3.00% |
| Krane Funds Advisors |
2.36% |
| Cosmic Blue Invest |
1.63% |
Share Performance
| Period |
Absolute Return (%) |
Relative Return (%) |
| 1-month |
-7.1 |
5.1 |
| 3-months |
-57.6 |
-50.0 |
| 6-months |
-82.4 |
-75.4 |
Key Financial Ratios
- ROE (Return on Equity): 30.7% (FY22E), 37.5% (FY23E), 16.8% (FY24E)
- ROA (Return on Assets): 19.4% (FY22E), 18.3% (FY23E), 6.8% (FY24E)
- Effective Tax Rate: 0.2% in FY20A and FY21A, 0% in FY22E and onwards.
Conclusion
Zhihu delivered stronger-than-expected results in 1Q22, showing resilience in the face of the epidemic and market challenges. While advertising revenue faced headwinds due to lockdowns, CCS and paid membership performed well. The company is expected to recover in the second half of 2022 with the easing of travel restrictions and macroeconomic stabilization. CMB International Global Markets (CMBIGM) has revised its revenue and profit forecasts downward to account for ongoing challenges, and the current BUY recommendation is based on the company's potential for growth and strong GPM.
