CMB International Securities | Equity Research | Company Update Summary
Core Content
This report provides an update on Zhihu (ZH US), focusing on its financial performance, user growth, and strategic outlook for 2H21E and beyond. It highlights Zhihu's strong revenue growth, user metrics, and the company's ability to maintain momentum despite macroeconomic challenges. The report also includes financial summaries, key ratios, and investment ratings.
Main Points
Financial Performance (2Q21)
- Revenue: RMB638mn (+144% YoY), 2% above consensus, 4% above estimates.
- Non-GAAP Net Loss: RMB200mn, in line with estimates but better than consensus.
- 3Q21E Guidance: Revenue range of RMB815-820mn, +113% to 114% YoY, with midpoint 1% above consensus and 0% above estimates.
User Metrics
- MAU: Reached 94.3mn in 2Q21, +46% YoY (vs. +38% in 1Q21).
- DAU/MAU: Stable, with daily time spent on the platform increasing.
- User Growth Drivers: Video content, diversified content, and effective sales and marketing (CAC < RMB48).
Revenue Streams
- CCS (Content Creation Services): Revenue grew +16x YoY, 35% above estimates, driven by client network expansion and improved CTR and ROI.
- Advertising: +48% YoY, slightly below estimates due to cautious ad sentiment and regulatory tightening, especially in the education sector.
- Paid Membership: Revenue +124% YoY, with stable retention ratios.
- Other Services: Showed moderate growth.
Revenue Growth Projections
- CCS: Expected to grow +6x in 3Q21E.
- Paid Membership: Expected to grow +96% in 3Q21E.
- Ads: Expected to grow +15% in 3Q21E.
Key Financial Figures
Earnings Summary (YE 31 Dec)
| Metric |
FY19A |
FY20A |
FY21E |
FY22E |
FY23E |
| Revenue (RMB mn) |
671 |
1,352 |
2,907 |
5,448 |
9,358 |
| YoY growth (%) |
NA |
101.7 |
115.0 |
87.4 |
71.8 |
| Adj. net income (RMB mn) |
(825) |
(337) |
(1,008) |
(962) |
59 |
| Adj. EPS (RMB) |
(2.02) |
(0.71) |
(1.77) |
(1.69) |
0.10 |
| P/S (x) |
38.7 |
22.4 |
12.4 |
6.6 |
3.9 |
Revenue Breakdown (2Q21)
| Revenue Segment |
2Q21 Revenue (RMB mn) |
QoQ Growth (%) |
YoY Growth (%) |
| Online Marketing Services |
20,828 |
15% |
18% |
| Other Services |
10,522 |
5% |
26% |
Earnings Revisions
| Metric |
CMBIS New Estimate |
CMBIS Old Estimate |
Diff (%) |
| Revenue (RMB mn) |
2,907 |
2,926 |
-0.7% |
| Gross Profit (RMB mn) |
1,462 |
1,602 |
-8.7% |
| Operating Profit (RMB mn) |
(1,430) |
(800) |
78.8% |
| Adj. net profit (RMB mn) |
(1,008) |
(470) |
114.4% |
| EPS (RMB) |
(1.77) |
(0.82) |
114.4% |
Investment Recommendation
- Rating: BUY (Maintain)
- Target Price: US$15.0 (Previous: US$16.0)
- Upside/Downside: +53.4%
- Current Price: US$9.8
Key Ratios
| Ratio |
FY19A |
FY20A |
FY21E |
FY22E |
FY23E |
| Revenue Growth (%) |
NA |
101.7 |
115.0 |
87.4 |
71.8 |
| Gross Profit Growth (%) |
NA |
142.7 |
92.9 |
106.8 |
88.1 |
| Adj. Net Profit Growth (%) |
NA |
(59.1) |
198.6 |
(4.5) |
(106.2) |
| Operating Margin (%) |
(157.9) |
(44.6) |
(49.2) |
(25.0) |
(5.1) |
| Pre-tax Margin (%) |
(149.8) |
(38.2) |
(46.9) |
(23.7) |
(4.1) |
| Adj. Net Margin (%) |
(123.0) |
(25.0) |
(34.7) |
(17.7) |
0.6 |
| ROE (%) |
(25.6) |
(12.3) |
(14.3) |
(15.9) |
1.0 |
Strategic Outlook
- CCS Growth: Expected to continue, with low penetration (<50k CCS vs. 460mn pieces of content).
- Defensive Position: Zhihu is relatively defensive due to limited regulatory risk and solid growth outlook.
- Bottom Line Adjustments: Bottom line trimmed to reflect continuous content investment and user acquisition.
Share Performance
| Period |
Absolute Return (%) |
Relative Return (%) |
| 1-Month |
-16.1 |
-17.7 |
| 3-Months |
16.4 |
5.5 |
Shareholding Structure
| Holder |
Percentage |
| BlackRock |
1.30% |
| Krane Funds Advisors |
0.81% |
| Barings |
0.76% |
Stock Data
| Metric |
Value (US$) |
| Market Cap |
5,222 mn |
| Avg 3 mths t/o |
19.69 mn |
| 52w High/Low |
13.85 / 6.81 |
| Total Issued Shares |
523 mn |
Analyst Certification & Disclosure
- The analyst certifies that the views expressed accurately reflect personal opinions and that there are no conflicts of interest.
- CMBIS or its affiliates have investment banking relationships with the issuers covered in this report.
CMBIS Ratings
| Rating |
Definition |
| BUY |
Potential return of over 15% over next 12 months |
| HOLD |
Potential return of +15% to -10% over next 12 months |
| SELL |
Potential loss of over 10% over next 12 months |
| NOT RATED |
Not rated by CMBIS |
| OUTPERFORM |
Industry expected to outperform the relevant broad market benchmark |
| MARKET-PERFORM |
Industry expected to perform in-line with the relevant broad market benchmark |
| UNDERPERFORM |
Industry expected to underperform the relevant broad market benchmark |
Important Disclosures
- The report is not an offer to buy or sell securities.
- CMBIS does not provide individually tailored investment advice.
- Past performance is not indicative of future results.
- The report is for the use of intended recipients only and may not be reproduced or distributed without prior consent.
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