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Champu13
2021-03-22

Zhihu IPO: China's Quora With Surging Sales Growth

Summary Zhihu is expected to complete its IPO in the next few days. Zhihu is basically China's Quor

Zhihu IPO: China's Quora With Surging Sales Growth

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Zhihu is basically China's Quor","content":"Summary\n<ul>\n <li>Zhihu is expected to complete its IPO in the next few days. Zhihu is basically China's Quora with surging sales growth.</li>\n <li>Zhihu has become the largest online question and answer community in China.</li>\n <li>The company generated a strong sales growth of 101.7% YoY to reach 1,352.2 million RMB in 2020. Operating margins improved from -157.9% in 2019 to -44.6% in 2020.</li>\n <li>Our base case and high case implied market caps of the company are $7.1 billion ($12 per share) and $9.0 billion ($15.2 per share), respectively.</li>\n <li>In the first few days of trading post-IPO, we expect the company's market cap to be trading in the mid-to-high end of our valuation analysis ($12 to $15.2 per share). We have a positive view of the Zhihu IPO.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/42b34bc66f3b200f1bd94f5bfa2529a9\" tg-width=\"618\" tg-height=\"279\">Photo by aelitta/iStock via Getty Images\nValuation Analysis\nZhihu Technology (ZH) announced its IPO terms. It plans to raise up to $632.5 million offering 55 million ADSs. The IPO price range is from $9.50 to $11.5 per share. At the midpoint of the IPO price range, the company would be valued at $6.2 billion. At the high end of the IPO price range ($11.5 per share), it would be valued at $6.8 billion. Along with the IPO, Zhihu also plans to raise $250 million in a private placement to Alibaba (BABA), JD.com(NASDAQ:JD), Tencent(OTCPK:TCEHY), and Lilith Games.\nZhihu has a similar business model as Quora where millions of people ask questions and exchange their views and experiences. Zhihu has become the largest online question and answer community in China.\nIn our valuation analysis, we have used the following seven companies below as comps that may be appropriate for Zhihu:\n<ul>\n <li>Baidu (BIDU)</li>\n <li>DouYu (DOYU)</li>\n <li>iQIYI (IQ)</li>\n <li>JOYY (YY)</li>\n <li>Weibo Corp. (WB)</li>\n <li>Bilibili (BILI)</li>\n <li>KuaishouTech(OTCPK:KUASF)</li>\n</ul>\nOur base case and high case implied market caps of the company are $7.1 billion ($12 per share) and $9.0 billion ($15.2 per share), respectively. We do believe that there will be a first day pop for this IPO and expect its market cap could reach the high end of the valuation sensitivity analysis (market cap of $9.0 billion or $15.2 per share). In the first few days of trading post IPO, we expect the company's market cap to be trading in the mid-to-high end of our valuation analysis ($12 to $15.2 per share). We have a positive view of the Zhihu IPO.\nOur base case valuation assumes our 2022E sales estimate of 3.7 billion RMB ($566 million) and apply an EV/Sales multiple of 10.4x to derive an implied EV of 38.3 billion RMB and an implied market cap of 46.1 billion RMB ($7.1 billion). The EV/Sales multiple of 10.4x is based on a 20% premium to the average of Kuaishou Tech andBilibili'sEV/Sales multiples in 2022.\nWe believe the 20% premium to the average of these two companies is appropriate for Zhihu mainly due to the latter company's much higher sales growth. For example, Zhihu's sales increased by 101.7% YoY in 2020. In comparison,Bilibili'ssales increased by 77% YoY and the consensus expects Kuaishou Tech's sales to increase by 50.5% YoY in 2020. The consensus expects Bilibili and Kuaishou Tech's sales to increase by 69.8% YoY and 59.3% YoY, respectively in 2021.\nIn comparison, we expect Zhihu's sales to increase by 74.9% in 2021. Despite higher sales growth for Zhihu, Bilibili and Kuaishou Tech have much larger market caps and are closer to achieving positive operating margins. With regards to Zhihu, despite slowing growth rate for its advertising revenues, its Paid Memberships and Content Commerce Revenues are exploding higher and many investors are likely to give higher points on these positive growth factors.\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Analysis</td>\n </tr>\n <tr>\n <td>Companies</td>\n <td>Mkt Cap (US$ bil)</td>\n <td>Sales (US$bil); 2019</td>\n <td>Sales (US$bil); 2020</td>\n <td>Sales (US$bil); 2021E</td>\n <td>Sales (US$bil); 2022E</td>\n </tr>\n <tr>\n <td>Baidu</td>\n <td>86.7</td>\n <td>15.5</td>\n <td>15.5</td>\n <td>19.4</td>\n <td>22.2</td>\n </tr>\n <tr>\n <td>DouYu</td>\n <td>4.2</td>\n <td>1.1</td>\n <td>1.5</td>\n <td>1.6</td>\n <td>1.9</td>\n </tr>\n <tr>\n <td>iQIYI</td>\n <td>21.9</td>\n <td>4.2</td>\n <td>4.3</td>\n <td>5.0</td>\n <td>5.7</td>\n </tr>\n <tr>\n <td>JOYY</td>\n <td>9.3</td>\n <td>3.7</td>\n <td>4.0</td>\n <td>4.4</td>\n <td>5.1</td>\n </tr>\n <tr>\n <td>Weibo</td>\n <td>11.8</td>\n <td>1.8</td>\n <td>1.7</td>\n <td>2.0</td>\n <td>2.2</td>\n </tr>\n <tr>\n <td>Bilibili</td>\n <td>38.4</td>\n <td>1.0</td>\n <td>1.7</td>\n <td>3.0</td>\n <td>4.2</td>\n </tr>\n <tr>\n <td>Kuaishou Tech</td>\n <td>170.5</td>\n <td>5.7</td>\n <td>8.5</td>\n <td>13.6</td>\n <td>19.9</td>\n </tr>\n <tr>\n <td>Source: Author, from Company data, Yahoo Finance, Marketscreener</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Analysis</td>\n </tr>\n <tr>\n <td>Companies</td>\n <td>P/S (2019)</td>\n <td>P/S (2020)</td>\n <td>P/S (2021E)</td>\n <td>P/S (2022E)</td>\n </tr>\n <tr>\n <td>Baidu</td>\n <td>5.6</td>\n <td>5.6</td>\n <td>4.5</td>\n <td>3.9</td>\n </tr>\n <tr>\n <td>DouYu</td>\n <td>4.0</td>\n <td>2.9</td>\n <td>2.6</td>\n <td>2.2</td>\n </tr>\n <tr>\n <td>iQIYI</td>\n <td>5.2</td>\n <td>5.1</td>\n <td>4.4</td>\n <td>3.9</td>\n </tr>\n <tr>\n <td>JOYY</td>\n <td>2.5</td>\n <td>2.4</td>\n <td>2.1</td>\n <td>1.8</td>\n </tr>\n <tr>\n <td>Weibo</td>\n <td>6.7</td>\n <td>7.1</td>\n <td>5.9</td>\n <td>5.4</td>\n </tr>\n <tr>\n <td>Bilibili</td>\n <td>39.1</td>\n <td>22.1</td>\n <td>13.0</td>\n <td>9.1</td>\n </tr>\n <tr>\n <td>Kuaishou Tech</td>\n <td>30.1</td>\n <td>20.0</td>\n <td>12.6</td>\n <td>8.6</td>\n </tr>\n <tr>\n <td>Average</td>\n <td>13.3</td>\n <td>9.3</td>\n <td>6.4</td>\n <td>5.0</td>\n </tr>\n <tr>\n <td>Source: Author, from Company data, Yahoo Finance, Marketscreener</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Analysis</td>\n </tr>\n <tr>\n <td>% Sales Change YoY</td>\n <td>2020</td>\n <td>2021E</td>\n <td>2022E</td>\n </tr>\n <tr>\n <td>Baidu</td>\n <td>-0.1%</td>\n <td>25.2%</td>\n <td>14.2%</td>\n </tr>\n <tr>\n <td>DouYu</td>\n <td>39.5%</td>\n <td>9.5%</td>\n <td>18.7%</td>\n </tr>\n <tr>\n <td>iQIYI</td>\n <td>2.6%</td>\n <td>16.1%</td>\n <td>13.4%</td>\n </tr>\n <tr>\n <td>JOYY</td>\n <td>6.6%</td>\n <td>11.4%</td>\n <td>16.4%</td>\n </tr>\n <tr>\n <td>Weibo</td>\n <td>-5.4%</td>\n <td>19.2%</td>\n <td>10.4%</td>\n </tr>\n <tr>\n <td>Bilibili</td>\n <td>77.4%</td>\n <td>69.8%</td>\n <td>43.1%</td>\n </tr>\n <tr>\n <td>Kuaishou Tech</td>\n <td>50.5%</td>\n <td>59.3%</td>\n <td>46.6%</td>\n </tr>\n <tr>\n <td>Average</td>\n <td>24.4%</td>\n <td>30.1%</td>\n <td>23.2%</td>\n </tr>\n <tr>\n <td>Source: Author, from Company data, Yahoo Finance, Marketscreener</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Analysis</td>\n </tr>\n <tr>\n <td>Companies</td>\n <td>Operating Profit/(Loss) (US$bil); 2019</td>\n <td>Operating Profit/(Loss) (US$bil); 2020</td>\n <td>Operating Profit/(Loss) (US$bil); 2021E</td>\n <td>Operating Profit/(Loss) (US$bil); 2022E</td>\n </tr>\n <tr>\n <td>Baidu</td>\n <td>0.9</td>\n <td>3.2</td>\n <td>3.0</td>\n <td>3.7</td>\n </tr>\n <tr>\n <td>DouYu</td>\n <td>-0.1</td>\n <td>0.1</td>\n <td>0.0</td>\n <td>0.2</td>\n </tr>\n <tr>\n <td>iQIYI</td>\n <td>-1.3</td>\n <td>-0.9</td>\n <td>-0.7</td>\n <td>-0.2</td>\n </tr>\n <tr>\n <td>JOYY</td>\n <td>0.4</td>\n <td>0.4</td>\n <td>0.5</td>\n <td>0.6</td>\n </tr>\n <tr>\n <td>Weibo</td>\n <td>0.6</td>\n <td>0.5</td>\n <td>0.6</td>\n <td>0.7</td>\n </tr>\n <tr>\n <td>Bilibili</td>\n <td>-0.2</td>\n <td>-0.4</td>\n <td>-0.5</td>\n <td>-0.2</td>\n </tr>\n <tr>\n <td>Kuaishou Tech</td>\n <td>0.1</td>\n <td>-1.6</td>\n <td>-1.1</td>\n <td>1.4</td>\n </tr>\n <tr>\n <td>Source: Author, from Company data, Yahoo Finance, Marketscreener</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Analysis</td>\n </tr>\n <tr>\n <td>Companies</td>\n <td>Operating Margin (2019); (%)</td>\n <td>Operating Margin (2020); (%)</td>\n <td>Operating Margin (2021E); (%)</td>\n <td>Operating Margin (2022E); (%)</td>\n </tr>\n <tr>\n <td>Baidu</td>\n <td>5.9%</td>\n <td>20.3%</td>\n <td>15.6%</td>\n <td>16.7%</td>\n </tr>\n <tr>\n <td>DouYu</td>\n <td>-6.9%</td>\n <td>6.8%</td>\n <td>1.2%</td>\n <td>8.3%</td>\n </tr>\n <tr>\n <td>iQIYI</td>\n <td>-31.7%</td>\n <td>-20.2%</td>\n <td>-13.2%</td>\n <td>-3.8%</td>\n </tr>\n <tr>\n <td>JOYY</td>\n <td>10.2%</td>\n <td>9.4%</td>\n <td>10.4%</td>\n <td>12.3%</td>\n </tr>\n <tr>\n <td>Weibo</td>\n <td>33.9%</td>\n <td>28.6%</td>\n <td>28.1%</td>\n <td>31.0%</td>\n </tr>\n <tr>\n <td>Bilibili</td>\n <td>-21.4%</td>\n <td>-25.9%</td>\n <td>-18.2%</td>\n <td>-4.0%</td>\n </tr>\n <tr>\n <td>Kuaishou Tech</td>\n <td>1.8%</td>\n <td>-18.4%</td>\n <td>-7.9%</td>\n <td>7.1%</td>\n </tr>\n <tr>\n <td>Average</td>\n <td>-1.2%</td>\n <td>0.1%</td>\n <td>2.3%</td>\n <td>9.7%</td>\n </tr>\n <tr>\n <td>Source: Author, from Company data, Yahoo Finance, Marketscreener</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Analysis</td>\n </tr>\n <tr>\n <td>Companies</td>\n <td>EV/S (2019)</td>\n <td>EV/S (2020)</td>\n <td>EV/S (2021E)</td>\n <td>EV/S (2022E)</td>\n </tr>\n <tr>\n <td>Baidu</td>\n <td>4.8</td>\n <td>4.8</td>\n <td>3.8</td>\n <td>3.3</td>\n </tr>\n <tr>\n <td>DouYu</td>\n <td>2.9</td>\n <td>2.1</td>\n <td>1.9</td>\n <td>1.6</td>\n </tr>\n <tr>\n <td>iQIYI</td>\n <td>5.4</td>\n <td>5.3</td>\n <td>4.6</td>\n <td>4.0</td>\n </tr>\n <tr>\n <td>JOYY</td>\n <td>1.8</td>\n <td>1.7</td>\n <td>1.5</td>\n <td>1.3</td>\n </tr>\n <tr>\n <td>Weibo</td>\n <td>6.8</td>\n <td>7.2</td>\n <td>6.0</td>\n <td>5.4</td>\n </tr>\n <tr>\n <td>Bilibili</td>\n <td>38.5</td>\n <td>21.7</td>\n <td>12.8</td>\n <td>8.9</td>\n </tr>\n <tr>\n <td>Kuaishou Tech</td>\n <td>29.5</td>\n <td>19.6</td>\n <td>12.3</td>\n <td>8.4</td>\n </tr>\n <tr>\n <td>Average</td>\n <td>12.8</td>\n <td>8.9</td>\n <td>6.1</td>\n <td>4.7</td>\n </tr>\n <tr>\n <td>Source: Author, from Company data, Yahoo Finance, Marketscreener</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Sensitivity Analysis (Implied EV)</td>\n </tr>\n <tr>\n <td>(million RMB)</td>\n <td>EV/S;2022E</td>\n </tr>\n <tr>\n <td>Low</td>\n <td>Base</td>\n <td>High</td>\n </tr>\n <tr>\n <td>9.4</td>\n <td>10.4</td>\n <td>12.5</td>\n </tr>\n <tr>\n <td>Low</td>\n <td>3,315</td>\n <td>31,030</td>\n <td>34,478</td>\n <td>41,373</td>\n </tr>\n <tr>\n <td>Estimated sales (million RMB); 2022E</td>\n <td>Base</td>\n <td>3,683</td>\n <td>34,478</td>\n <td>38,308</td>\n <td>45,970</td>\n </tr>\n <tr>\n <td>High</td>\n <td>4,052</td>\n <td>37,925</td>\n <td>42,139</td>\n <td>50,567</td>\n </tr>\n <tr>\n <td>Source: Our Estimates</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Sensitivity Analysis (Implied Market Cap)</td>\n </tr>\n <tr>\n <td>(million RMB)</td>\n <td>EV/S; 2022E</td>\n </tr>\n <tr>\n <td>Low</td>\n <td>Base</td>\n <td>High</td>\n </tr>\n <tr>\n <td>9.4</td>\n <td>10.4</td>\n <td>12.5</td>\n </tr>\n <tr>\n <td>Low</td>\n <td>3,315</td>\n <td>38,807</td>\n <td>42,255</td>\n <td>49,150</td>\n </tr>\n <tr>\n <td>Estimated sales (million RMB); 2022E</td>\n <td>Base</td>\n <td>3,683</td>\n <td>42,255</td>\n <td>46,086</td>\n <td>53,747</td>\n </tr>\n <tr>\n <td>High</td>\n <td>4,052</td>\n <td>45,703</td>\n <td>49,917</td>\n <td>58,344</td>\n </tr>\n <tr>\n <td>Source: Our Estimates</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Sensitivity Analysis (Implied Market Cap)</td>\n </tr>\n <tr>\n <td>(US$ million)</td>\n <td>EV/S; 2022E</td>\n </tr>\n <tr>\n <td>Low</td>\n <td>Base</td>\n <td>High</td>\n </tr>\n <tr>\n <td>9.4</td>\n <td>10.4</td>\n <td>12.5</td>\n </tr>\n <tr>\n <td>Low</td>\n <td>509</td>\n <td>5,961</td>\n <td>6,491</td>\n <td>7,550</td>\n </tr>\n <tr>\n <td>Estimated sales (million USD); 2022E</td>\n <td>Base</td>\n <td>566</td>\n <td>6,491</td>\n <td>7,079</td>\n <td>8,256</td>\n </tr>\n <tr>\n <td>High</td>\n <td>622</td>\n <td>7,020</td>\n <td>7,668</td>\n <td>8,962</td>\n </tr>\n <tr>\n <td>Source: Our Estimates</td>\n </tr>\n </tbody>\n</table>\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Comparable Companies Valuation Sensitivity Analysis (Implied Price Per Share)</td>\n </tr>\n <tr>\n <td>(US$)</td>\n <td>EV/S; 2022E</td>\n </tr>\n <tr>\n <td>Low</td>\n <td>Base</td>\n <td>High</td>\n </tr>\n <tr>\n <td>9.4</td>\n <td>10.4</td>\n <td>12.5</td>\n </tr>\n <tr>\n <td>Low</td>\n <td>509</td>\n <td>10.1</td>\n <td>11.0</td>\n <td>12.8</td>\n </tr>\n <tr>\n <td>Estimated sales (million USD); 2022E</td>\n <td>Base</td>\n <td>566</td>\n <td>11.0</td>\n <td>12.0</td>\n <td>14.0</td>\n </tr>\n <tr>\n <td>High</td>\n <td>622</td>\n <td>11.9</td>\n <td>13.0</td>\n <td>15.2</td>\n </tr>\n <tr>\n <td>Source: Our Estimates</td>\n </tr>\n </tbody>\n</table>\nZhihu Income Statement Forecast\nWe estimate the company's sales to increase by 74.9% YoY to reach 2.36 billion RMB in 2021 and increase by 55.8% YoY to reach 3.68 billion RMB in 2022. From 2020 to 2025, we estimate the company's sales to increase at a CAGR of 43.4%. We have assumed Zhihu to start generating positive operating margins in 2024 (4.8%) and have assumed its operating margin to increase to 10.1% in 2025. We have assumed the company's sales to reach 8.21 billion RMB ($1.26 billion) and operating profit of 0.83 billion RMB ($0.13 billion) in 2025.\nSales Breakdown\nAdvertising and paid memberships account for the biggest portion of the company's revenues. Advertising accounted for 86.1% and 62.4% of total revenues in 2019 and 2020, respectively. We estimate advertising as a percentage of revenues to gradually decline in the next five years as it is offset by the faster growing Paid Memberships and Content Commerce Solutions. We estimate advertising as a percentage of sales to decline to 34.1% in 2021 and 22.3% in 2025.\nPaid Memberships represented 13.1% of total revenues in 2019, which increased to 23.7% of total revenues in 2020. We have assumed Paid Membership revenues as a percentage of total revenues to increase to 31.5% in 2021 and 37.8% in 2025.\nContent Commerce Solutions and Other sales also increased sharply in 2020. Content Commerce Solutions revenues jumped from 0.6 million RMB in 2019 to 135.8 million RMB in 2020. In early 2020, the company launched Content-Commerce solutions, which provide merchants and brands a one-stop shop for all of their sales and marketing needs, including marketing plans. We have assumed Content Commerce Solutions as a percentage of total revenue to jump from 10% in 2020 to 17.8% in 2021 and 32.3% in 2025.\nGross Margins\nThe company's gross margins improved from 46.6% in 2019 to 56.0% in 2020, driven by an overall improving business scalability. We have assumed further improvements in gross margins to 57.4% in 2021 and 62.3% in 2025.\nTotal Operating Expenses and Operating Margins\nTotal operating expenses as a percentage of revenues declined significantly from 204.4% in 2019 to 100.6% in 2020. We expect this ratio to improve further to 79% in 2021, 69.2% in 2022, and 57.2% in 2025. The bulk of the improvements in operating expenses is coming from lower SG&amp;A and R&amp;D expenses as a percentage of revenues in the next five years.\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihu Income Statement Forecast</td>\n </tr>\n <tr>\n <td>(RMB mn)</td>\n <td>2019</td>\n <td>2020</td>\n <td>2021E</td>\n <td>2022E</td>\n <td>2023E</td>\n <td>2024E</td>\n <td>2025E</td>\n </tr>\n <tr>\n <td>Revenue</td>\n <td>670.5</td>\n <td>1,352.2</td>\n <td>2,364.8</td>\n <td>3,683.3</td>\n <td>5,180.8</td>\n <td>6,691.5</td>\n <td>8,212.6</td>\n </tr>\n <tr>\n <td>Advertising</td>\n <td>577.4</td>\n <td>843.3</td>\n <td>1,076.2</td>\n <td>1,254.6</td>\n <td>1,441.8</td>\n <td>1,635.4</td>\n <td>1,833.0</td>\n </tr>\n <tr>\n <td>Paid Membership</td>\n <td>88.0</td>\n <td>320.5</td>\n <td>743.8</td>\n <td>1,333.4</td>\n <td>1,967.6</td>\n <td>2,529.0</td>\n <td>3,106.3</td>\n </tr>\n <tr>\n <td>Content Commerce Solutions</td>\n <td>0.6</td>\n <td>135.8</td>\n <td>421.0</td>\n <td>863.0</td>\n <td>1,406.7</td>\n <td>2,027.1</td>\n <td>2,652.8</td>\n </tr>\n <tr>\n <td>Others</td>\n <td>4.5</td>\n <td>52.7</td>\n <td>123.7</td>\n <td>232.3</td>\n <td>364.8</td>\n <td>500.0</td>\n <td>620.5</td>\n </tr>\n <tr>\n <td>Cost of Revenue</td>\n <td>358.2</td>\n <td>594.4</td>\n <td>1,008.3</td>\n <td>1,523.4</td>\n <td>2,078.5</td>\n <td>2,604.0</td>\n <td>3,100.1</td>\n </tr>\n <tr>\n <td>Gross Profit</td>\n <td>312.3</td>\n <td>757.8</td>\n <td>1,356.5</td>\n <td>2,159.9</td>\n <td>3,102.3</td>\n <td>4,087.4</td>\n <td>5,112.5</td>\n </tr>\n <tr>\n <td>SG&amp;A Expenses</td>\n <td>766.5</td>\n <td>734.8</td>\n <td>963.7</td>\n <td>1,275.9</td>\n <td>1,525.5</td>\n <td>1,773.2</td>\n <td>1,958.7</td>\n </tr>\n <tr>\n <td>R&amp;D Expenses</td>\n <td>351.0</td>\n <td>329.8</td>\n <td>490.2</td>\n <td>725.3</td>\n <td>969.2</td>\n <td>1,189.2</td>\n <td>1,386.6</td>\n </tr>\n <tr>\n <td>G&amp;A Expenses</td>\n <td>253.3</td>\n <td>296.2</td>\n <td>414.3</td>\n <td>548.6</td>\n <td>655.9</td>\n <td>804.7</td>\n <td>938.3</td>\n </tr>\n <tr>\n <td>Total Operating Expenses</td>\n <td>1,370.7</td>\n <td>1,360.7</td>\n <td>1,868.3</td>\n <td>2,549.8</td>\n <td>3,150.5</td>\n <td>3,767.2</td>\n <td>4,283.6</td>\n </tr>\n <tr>\n <td>Loss from Operations</td>\n <td>-1,058.5</td>\n <td>-602.9</td>\n <td>-511.8</td>\n <td>-389.9</td>\n <td>-48.2</td>\n <td>320.2</td>\n <td>828.9</td>\n </tr>\n <tr>\n <td>Non-Operating Items</td>\n <td>54.3</td>\n <td>86.4</td>\n <td>103.5</td>\n <td>51.8</td>\n <td>31.1</td>\n <td>18.6</td>\n <td>11.2</td>\n </tr>\n <tr>\n <td>Earnings Before Tax</td>\n <td>-1,004.2</td>\n <td>-516.5</td>\n <td>-408.3</td>\n <td>-338.2</td>\n <td>-17.2</td>\n <td>338.9</td>\n <td>840.1</td>\n </tr>\n <tr>\n <td>Income Tax</td>\n <td>0.0</td>\n <td>1.1</td>\n <td>0.0</td>\n <td>0.0</td>\n <td>0.0</td>\n <td>0.0</td>\n <td>0.0</td>\n </tr>\n <tr>\n <td>Net Loss</td>\n <td>-1,004.2</td>\n <td>-517.6</td>\n <td>-408.3</td>\n <td>-338.2</td>\n <td>-17.2</td>\n <td>338.9</td>\n <td>840.1</td>\n </tr>\n <tr></tr>\n <tr>\n <td>% of Sales</td>\n <td>2019</td>\n <td>2020</td>\n <td>2021E</td>\n <td>2022E</td>\n <td>2023E</td>\n <td>2024E</td>\n <td>2025E</td>\n </tr>\n <tr>\n <td>Revenue</td>\n <td>100.0%</td>\n <td>100.0%</td>\n <td>100.0%</td>\n <td>100.0%</td>\n <td>100.0%</td>\n <td>100.0%</td>\n <td>100.0%</td>\n </tr>\n <tr>\n <td>Advertising</td>\n <td>86.1%</td>\n <td>62.4%</td>\n <td>45.5%</td>\n <td>34.1%</td>\n <td>27.8%</td>\n <td>24.4%</td>\n <td>22.3%</td>\n </tr>\n <tr>\n <td>Paid Membership</td>\n <td>13.1%</td>\n <td>23.7%</td>\n <td>31.5%</td>\n <td>36.2%</td>\n <td>38.0%</td>\n <td>37.8%</td>\n <td>37.8%</td>\n </tr>\n <tr>\n <td>Content Commerce Solutions</td>\n <td>0.1%</td>\n <td>10.0%</td>\n <td>17.8%</td>\n <td>23.4%</td>\n <td>27.2%</td>\n <td>30.3%</td>\n <td>32.3%</td>\n </tr>\n <tr>\n <td>Others</td>\n <td>0.7%</td>\n <td>3.9%</td>\n <td>5.2%</td>\n <td>6.3%</td>\n <td>7.0%</td>\n <td>7.5%</td>\n <td>7.6%</td>\n </tr>\n <tr>\n <td>Cost of Revenue</td>\n <td>53.4%</td>\n <td>44.0%</td>\n <td>42.6%</td>\n <td>41.4%</td>\n <td>40.1%</td>\n <td>38.9%</td>\n <td>37.7%</td>\n </tr>\n <tr>\n <td>Gross Profit</td>\n <td>46.6%</td>\n <td>56.0%</td>\n <td>57.4%</td>\n <td>58.6%</td>\n <td>59.9%</td>\n <td>61.1%</td>\n <td>62.3%</td>\n </tr>\n <tr>\n <td>SG&amp;A Expenses</td>\n <td>114.3%</td>\n <td>54.3%</td>\n <td>40.8%</td>\n <td>34.6%</td>\n <td>29.4%</td>\n <td>26.5%</td>\n <td>23.8%</td>\n </tr>\n <tr>\n <td>R&amp;D Expenses</td>\n <td>52.3%</td>\n <td>24.4%</td>\n <td>20.7%</td>\n <td>19.7%</td>\n <td>18.7%</td>\n <td>17.8%</td>\n <td>16.9%</td>\n </tr>\n <tr>\n <td>G&amp;A Expenses</td>\n <td>37.8%</td>\n <td>21.9%</td>\n <td>17.5%</td>\n <td>14.9%</td>\n <td>12.7%</td>\n <td>12.0%</td>\n <td>11.4%</td>\n </tr>\n <tr>\n <td>Total Operating Expenses</td>\n <td>204.4%</td>\n <td>100.6%</td>\n <td>79.0%</td>\n <td>69.2%</td>\n <td>60.8%</td>\n <td>56.3%</td>\n <td>52.2%</td>\n </tr>\n <tr>\n <td>Loss from Operations</td>\n <td>-157.9%</td>\n <td>-44.6%</td>\n <td>-21.6%</td>\n <td>-10.6%</td>\n <td>-0.9%</td>\n <td>4.8%</td>\n <td>10.1%</td>\n </tr>\n <tr></tr>\n <tr>\n <td>% Change YoY</td>\n <td>2020</td>\n <td>2021E</td>\n <td>2022E</td>\n <td>2023E</td>\n <td>2024E</td>\n <td>2025E</td>\n </tr>\n <tr>\n <td>Revenue</td>\n <td>101.7%</td>\n <td>74.9%</td>\n <td>55.8%</td>\n <td>40.7%</td>\n <td>29.2%</td>\n <td>22.7%</td>\n </tr>\n <tr>\n <td>Advertising</td>\n <td>46.0%</td>\n <td>27.6%</td>\n <td>16.6%</td>\n <td>14.9%</td>\n <td>13.4%</td>\n <td>12.1%</td>\n </tr>\n <tr>\n <td>Paid Membership</td>\n <td>264.2%</td>\n <td>132.1%</td>\n <td>79.3%</td>\n <td>47.6%</td>\n <td>28.5%</td>\n <td>22.8%</td>\n </tr>\n <tr>\n <td>Content Commerce Solutions</td>\n <td>21118.8%</td>\n <td>210.0%</td>\n <td>105.0%</td>\n <td>63.0%</td>\n <td>44.1%</td>\n <td>30.9%</td>\n </tr>\n <tr>\n <td>Others</td>\n <td>1081.6%</td>\n <td>135.0%</td>\n <td>87.8%</td>\n <td>57.0%</td>\n <td>37.1%</td>\n <td>24.1%</td>\n </tr>\n <tr>\n <td>Cost of Revenue</td>\n <td>65.9%</td>\n <td>69.6%</td>\n <td>51.1%</td>\n <td>36.4%</td>\n <td>25.3%</td>\n <td>19.1%</td>\n </tr>\n <tr>\n <td>Gross Profit</td>\n <td>142.7%</td>\n <td>79.0%</td>\n <td>59.2%</td>\n <td>43.6%</td>\n <td>31.8%</td>\n <td>25.1%</td>\n </tr>\n <tr>\n <td>SG&amp;A Expenses</td>\n <td>-4.1%</td>\n <td>31.2%</td>\n <td>32.4%</td>\n <td>19.6%</td>\n <td>16.2%</td>\n <td>10.5%</td>\n </tr>\n <tr>\n <td>R&amp;D Expenses</td>\n <td>-6.1%</td>\n <td>48.7%</td>\n <td>48.0%</td>\n <td>33.6%</td>\n <td>22.7%</td>\n <td>16.6%</td>\n </tr>\n <tr>\n <td>G&amp;A Expenses</td>\n <td>16.9%</td>\n <td>39.9%</td>\n <td>32.4%</td>\n <td>19.6%</td>\n <td>22.7%</td>\n <td>16.6%</td>\n </tr>\n <tr>\n <td>Total Operating Expenses</td>\n <td>-0.7%</td>\n <td>37.3%</td>\n <td>36.5%</td>\n <td>23.6%</td>\n <td>19.6%</td>\n <td>13.7%</td>\n </tr>\n <tr>\n <td>Loss from Operations</td>\n <td>-43.0%</td>\n <td>-15.1%</td>\n <td>-23.8%</td>\n <td>-87.6%</td>\n <td>TB</td>\n <td>158.8%</td>\n </tr>\n <tr>\n <td>Source: Author, from Company data; TB = turned black</td>\n </tr>\n </tbody>\n</table>\n<img src=\"https://static.tigerbbs.com/c019cc86f4d4c1d9ffe15d3b4a4bfa75\" tg-width=\"772\" tg-height=\"480\">Source: Author, from Company data, Our Estimates\n<img src=\"https://static.tigerbbs.com/ef629be32d2c34d625cb287ad648206d\" tg-width=\"757\" tg-height=\"488\">Source: Author, from Company data, Our Estimates\n<img src=\"https://static.tigerbbs.com/b9561a02993fbc88c2cad88e68c08730\" tg-width=\"920\" tg-height=\"485\">Source: Author, from Company data, Our Estimates\nCompany Background\nAt the end of 2020, Zhihu had more than 43.1 million cumulative content creators that contributed 315 million questions and answers. In 4Q 2020, the company had 75.7 million average monthly active users, up 33% YoY. One of the key strengths of the company is that it is recognized as one of the most trustworthy online content communities and regarded as providing one of the highest quality content in China. Zhihu has tried to capitalize on its large user base to provide numerous multimedia functions including live streaming, e-commerce, online education, and other video content.\nIn August 2019, Zhihu received $434 million in funding from leading investors including Baidu and Kuaishou Technology, valuing the company at $3.5 billion. Given that the company had $97 million in sales in 2019, this would suggest a P/S valuation multiple of 36x. If we take the same P/S multiple apply to the company's 2020 sales of $207 million, this would suggest an implied valuation of $7.5 billion.\nZhihu was originally developed as a question and answer online community in 2010. At the end of 2020, there were a total of 315 million Q&amp;As spanning more than 1,000 verticals and 571,000 topics. Zhihu is one of the top five comprehensive online content communities in China, in terms of average mobile MAUs and revenue in 2020. The company uses artificial intelligence, cloud, and big data algorithms to improve the optimization of its content and services.\nMajor Shareholders of Zhihu\nThe founder &amp; CEOZhou Yuanowns an 8.2% stake in the company (but 46.6% voting rights). Sinovation Ventures owns a 13.1% stake and Tencent Holdings Ltd. owns a 12.3% stake of Zhihu.\nKey Demographics\nThe diagram below provides some of the key demographics of Zhihu user base. Males accounted for 56.9% of total users. People under 30 years old accounted for 78.7% of its total user base. Tier I and new tier I cities represented 52.6% of total user base. Many of the users of Zhihu are students and white collar professionals.\n<img src=\"https://static.tigerbbs.com/524d689472daad1c99491d74dfdbfe24\" tg-width=\"295\" tg-height=\"389\">Source: Author, from Company data\nRevenue Breakdown\nAdvertising and paid memberships account for the biggest portion of the company's revenues. Advertising accounted for 86.1% and 62.4% of total revenues in 2019 and 2020, respectively. The company's advertising revenue is mainly driven by its MAUs and advertising revenue per MAU. The company's MAUs increased by 42.7% YoY to 68.5 million in 2020. The company started its online advertising business in 2016 and introduced paid content in 2018.\nPaid memberships represented 13.1% of total revenues in 2019, which increased to 23.7% of total revenues in 2020. Average monthly members jumped by 311.5% YoY to 2.36 million in 2020, which is a testament of an increasing number of customers that value the premium content available on Zhihu.\nIn March 2019, the company introduced the Yan Selection membership program, making it the first payment-based questions &amp; answers community. It provides its members with unlimited access to about 3.4 million paid content including online lectures, columns, audio books, and e-journals. This is one of the biggest strengths of the company as it shows how high quality data and content can generate serious amount of revenues and it also provides a more steady monthly revenue inflow.\nContent Commerce Solutions and Other sales also increased sharply in 2020. Content Commerce Solutions revenues jumped from 0.6 million RMB in 2019 to 135.8 million RMB in 2020. In early 2020, the company launched Content-Commerce solutions, which provide merchants and brands a one-stop shop for all of their sales and marketing needs, including marketing plans, assigning the most relevant content creators to interested users, and facilitating content creation.\nChina's content-commerce solution market is expected to be one of the fastest growing sectors in the next several years. According to CIC Consultancy, China's content-commerce solution market is expected to enjoy a strong CAGR growth of 46.4% from 2019 to 2025 (112.3 billion RMB).\nMarket Opportunities\nChina’s Online Content Communities Market Size\nOnline content communities refer to UGC (user generated content)-focused (including PUGC (professional user generated content) focused online content market players where content creators are also users, who are actively engaged within the communities. The content communities generally can stimulate higher level of user engagement, more interactive user experience, and enjoy lower content cost, compared to PGC (professionally generated content) players. PGC is content created by the branded company or organization.\nChina's online content communities market size increased from 38.6 billion RMB in 2015 to 275.8 billion RMB in 2019 and is further expected to rise to 1.3 trillion RMB in 2025, representing a CAGR of 30.3% from 2019 to 2025, which is higher than the overall online content market growth.\nChina's online content community market has more diversified monetization channels including online advertising, paid membership, content e-commerce, content-commerce solutions, virtual gifting in live streaming, online games, and online education services. In comparison, the US online content community's monetization is mainly through advertising.\nOne of the major positives about the company is the growing trend of more Chinese consumers that are willing to pay money for higher quality content. The number of paying users in China’s online content communities is expected to increase at a CAGR of 17.1% between 2019 and 2025, which means an increase of 360.4 million extra paying users of online content communities to 588.2 million in 2025.\nChina's Online Content Market\nChina's online content market tripled from 2015 to reach 1.2 trillion RMB in 2019. This market is expected to increase to 3.7 trillion RMB in 2025, representing a CAGR of 21.4% from 2019 to 2025.\nChina’s Online Content Market Size (in terms of revenue), 2015-2025E\n<img src=\"https://static.tigerbbs.com/69a7db9cacf26245273702a255aabdb8\" tg-width=\"573\" tg-height=\"258\">Source: CIC Report\nMarket Size of China’s Online Content Communities (in terms of revenue),2015-2025E\n<img src=\"https://static.tigerbbs.com/aee42792caf4aa2cbdcd17f757a75727\" tg-width=\"584\" tg-height=\"285\">Source: CIC Report\nChina’s Paid Membership Market Size (in terms of revenue), 2015-2025E\n<img src=\"https://static.tigerbbs.com/77ff121d78cb1dd922d524a78570152e\" tg-width=\"520\" tg-height=\"286\">Source: CIC Report\nContent-commerce solutions\nTo provide integrated marketing services, the online content communities provide content-commerce solutions for content creation, content distribution, and content conversion. The company provides integrated content-commerce solutions, providing merchants and brands one-stop services for all their sales and marketing needs, from making marketing plans, facilitating content creation, assigning the most relevant content creators, to distributing to the interested users. China's content commerce solution market is expected to grow from 11.4 billion RMB in 2019 to 112.3 billion RMB in 2025, at a CAGR of 46.4%.\nChina’s Content-Commerce Solution Market Size (in terms of revenue), 2015-2025E\n<img src=\"https://static.tigerbbs.com/01a230d3fb2d4cf4aeeebfd5c3c691c3\" tg-width=\"520\" tg-height=\"269\">Source: CIC Report\n\nEmployees- At the end of 2020, the company had 1,651 full time employees, all of whom were based in China, primarily at its headquarters in Beijing, China.\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Zhihui Employees Breakdown (At the end of 2020)</td>\n </tr>\n <tr>\n <td>Function</td>\n <td>Number of employees</td>\n <td>% of Total Employees</td>\n </tr>\n <tr>\n <td>Content and Content-Related Operations</td>\n <td>461</td>\n <td>27.9%</td>\n </tr>\n <tr>\n <td>Research and Development</td>\n <td>672</td>\n <td>40.7%</td>\n </tr>\n <tr>\n <td>Sales and Marketing</td>\n <td>337</td>\n <td>20.4%</td>\n </tr>\n <tr>\n <td>General Administration</td>\n <td>181</td>\n <td>11.0%</td>\n </tr>\n <tr>\n <td>Total</td>\n <td>1,651</td>\n <td>100.0%</td>\n </tr>\n <tr>\n <td>Source: Company data</td>\n </tr>\n </tbody>\n</table>\nKey Investment Risks\n<ul>\n <li>Post COVID-19 environment - The COVID-19 has had a positive impact on the company as millions of people in China spent more time at home and increased their time on the Internet and mobile phones which led to usage of more Internet services such as Zhihu. Although the COVID-19 situation currently is not as dire as a year ago, there are still numerous social distancing measures. In the post COVID-19 environment, this could lead to a slower growth rate of its sales and profit improvement.</li>\n <li>Censorship related risks - Given that Zhihu is one of the largest Q&amp;A websites in China, it is likely to face numerous censorship related issues from the Chinese government and this remains one of the key risk factors.</li>\n <li>Recent share price declines of Chinese tech giants and Chinese tech IPOs in the US - There have been some big declines in share prices of several Chinese tech giants includingAlibaba Group (9988 HK)andTencent Holdings (700 HK). Share prices of other Chinese tech giants such as JD.com and Meituan have also declined in the past few weeks but not as much as Alibaba and Tencent. In addition,Cloopen Group Holding Ltd. (RAAS US),which recently completed its IPO in February saw its share price surge in the first day but it has dropped by more than 50% since then.</li>\n <li>Mostly text-based content platform - For now, most of Zhihu's content tend to be text-based, although the company is offering more video and non-text-based content. For the users that prefer non-text-based content, this could deter some people from becoming paid members or users of Zhihu. However, the company is actively making efforts to provide more videos, live streaming, and other non-text-based content. These efforts to provide a more diversified source of content could result in higher operating costs.</li>\n <li>Lack of profitability - Despite strong sales growth, the company remains unprofitable with an operating margin of -44.6% in 2020.</li>\n</ul>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Zhihu IPO: China's Quora With Surging Sales Growth</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nZhihu IPO: China's Quora With Surging Sales Growth\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-03-22 15:18 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4415306-zhihu-ipo-chinas-quora-with-surging-sales-growth>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nZhihu is expected to complete its IPO in the next few days. Zhihu is basically China's Quora with surging sales growth.\nZhihu has become the largest online question and answer community in ...\n\n<a href=\"https://seekingalpha.com/article/4415306-zhihu-ipo-chinas-quora-with-surging-sales-growth\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"ZH":"知乎"},"source_url":"https://seekingalpha.com/article/4415306-zhihu-ipo-chinas-quora-with-surging-sales-growth","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1178841475","content_text":"Summary\n\nZhihu is expected to complete its IPO in the next few days. Zhihu is basically China's Quora with surging sales growth.\nZhihu has become the largest online question and answer community in China.\nThe company generated a strong sales growth of 101.7% YoY to reach 1,352.2 million RMB in 2020. Operating margins improved from -157.9% in 2019 to -44.6% in 2020.\nOur base case and high case implied market caps of the company are $7.1 billion ($12 per share) and $9.0 billion ($15.2 per share), respectively.\nIn the first few days of trading post-IPO, we expect the company's market cap to be trading in the mid-to-high end of our valuation analysis ($12 to $15.2 per share). We have a positive view of the Zhihu IPO.\n\nPhoto by aelitta/iStock via Getty Images\nValuation Analysis\nZhihu Technology (ZH) announced its IPO terms. It plans to raise up to $632.5 million offering 55 million ADSs. The IPO price range is from $9.50 to $11.5 per share. At the midpoint of the IPO price range, the company would be valued at $6.2 billion. At the high end of the IPO price range ($11.5 per share), it would be valued at $6.8 billion. Along with the IPO, Zhihu also plans to raise $250 million in a private placement to Alibaba (BABA), JD.com(NASDAQ:JD), Tencent(OTCPK:TCEHY), and Lilith Games.\nZhihu has a similar business model as Quora where millions of people ask questions and exchange their views and experiences. Zhihu has become the largest online question and answer community in China.\nIn our valuation analysis, we have used the following seven companies below as comps that may be appropriate for Zhihu:\n\nBaidu (BIDU)\nDouYu (DOYU)\niQIYI (IQ)\nJOYY (YY)\nWeibo Corp. (WB)\nBilibili (BILI)\nKuaishouTech(OTCPK:KUASF)\n\nOur base case and high case implied market caps of the company are $7.1 billion ($12 per share) and $9.0 billion ($15.2 per share), respectively. We do believe that there will be a first day pop for this IPO and expect its market cap could reach the high end of the valuation sensitivity analysis (market cap of $9.0 billion or $15.2 per share). In the first few days of trading post IPO, we expect the company's market cap to be trading in the mid-to-high end of our valuation analysis ($12 to $15.2 per share). We have a positive view of the Zhihu IPO.\nOur base case valuation assumes our 2022E sales estimate of 3.7 billion RMB ($566 million) and apply an EV/Sales multiple of 10.4x to derive an implied EV of 38.3 billion RMB and an implied market cap of 46.1 billion RMB ($7.1 billion). The EV/Sales multiple of 10.4x is based on a 20% premium to the average of Kuaishou Tech andBilibili'sEV/Sales multiples in 2022.\nWe believe the 20% premium to the average of these two companies is appropriate for Zhihu mainly due to the latter company's much higher sales growth. For example, Zhihu's sales increased by 101.7% YoY in 2020. In comparison,Bilibili'ssales increased by 77% YoY and the consensus expects Kuaishou Tech's sales to increase by 50.5% YoY in 2020. The consensus expects Bilibili and Kuaishou Tech's sales to increase by 69.8% YoY and 59.3% YoY, respectively in 2021.\nIn comparison, we expect Zhihu's sales to increase by 74.9% in 2021. Despite higher sales growth for Zhihu, Bilibili and Kuaishou Tech have much larger market caps and are closer to achieving positive operating margins. With regards to Zhihu, despite slowing growth rate for its advertising revenues, its Paid Memberships and Content Commerce Revenues are exploding higher and many investors are likely to give higher points on these positive growth factors.\n\n\n\n\nZhihu Comparable Companies Valuation Analysis\n\n\nCompanies\nMkt Cap (US$ bil)\nSales (US$bil); 2019\nSales (US$bil); 2020\nSales (US$bil); 2021E\nSales (US$bil); 2022E\n\n\nBaidu\n86.7\n15.5\n15.5\n19.4\n22.2\n\n\nDouYu\n4.2\n1.1\n1.5\n1.6\n1.9\n\n\niQIYI\n21.9\n4.2\n4.3\n5.0\n5.7\n\n\nJOYY\n9.3\n3.7\n4.0\n4.4\n5.1\n\n\nWeibo\n11.8\n1.8\n1.7\n2.0\n2.2\n\n\nBilibili\n38.4\n1.0\n1.7\n3.0\n4.2\n\n\nKuaishou Tech\n170.5\n5.7\n8.5\n13.6\n19.9\n\n\nSource: Author, from Company data, Yahoo Finance, Marketscreener\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Analysis\n\n\nCompanies\nP/S (2019)\nP/S (2020)\nP/S (2021E)\nP/S (2022E)\n\n\nBaidu\n5.6\n5.6\n4.5\n3.9\n\n\nDouYu\n4.0\n2.9\n2.6\n2.2\n\n\niQIYI\n5.2\n5.1\n4.4\n3.9\n\n\nJOYY\n2.5\n2.4\n2.1\n1.8\n\n\nWeibo\n6.7\n7.1\n5.9\n5.4\n\n\nBilibili\n39.1\n22.1\n13.0\n9.1\n\n\nKuaishou Tech\n30.1\n20.0\n12.6\n8.6\n\n\nAverage\n13.3\n9.3\n6.4\n5.0\n\n\nSource: Author, from Company data, Yahoo Finance, Marketscreener\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Analysis\n\n\n% Sales Change YoY\n2020\n2021E\n2022E\n\n\nBaidu\n-0.1%\n25.2%\n14.2%\n\n\nDouYu\n39.5%\n9.5%\n18.7%\n\n\niQIYI\n2.6%\n16.1%\n13.4%\n\n\nJOYY\n6.6%\n11.4%\n16.4%\n\n\nWeibo\n-5.4%\n19.2%\n10.4%\n\n\nBilibili\n77.4%\n69.8%\n43.1%\n\n\nKuaishou Tech\n50.5%\n59.3%\n46.6%\n\n\nAverage\n24.4%\n30.1%\n23.2%\n\n\nSource: Author, from Company data, Yahoo Finance, Marketscreener\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Analysis\n\n\nCompanies\nOperating Profit/(Loss) (US$bil); 2019\nOperating Profit/(Loss) (US$bil); 2020\nOperating Profit/(Loss) (US$bil); 2021E\nOperating Profit/(Loss) (US$bil); 2022E\n\n\nBaidu\n0.9\n3.2\n3.0\n3.7\n\n\nDouYu\n-0.1\n0.1\n0.0\n0.2\n\n\niQIYI\n-1.3\n-0.9\n-0.7\n-0.2\n\n\nJOYY\n0.4\n0.4\n0.5\n0.6\n\n\nWeibo\n0.6\n0.5\n0.6\n0.7\n\n\nBilibili\n-0.2\n-0.4\n-0.5\n-0.2\n\n\nKuaishou Tech\n0.1\n-1.6\n-1.1\n1.4\n\n\nSource: Author, from Company data, Yahoo Finance, Marketscreener\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Analysis\n\n\nCompanies\nOperating Margin (2019); (%)\nOperating Margin (2020); (%)\nOperating Margin (2021E); (%)\nOperating Margin (2022E); (%)\n\n\nBaidu\n5.9%\n20.3%\n15.6%\n16.7%\n\n\nDouYu\n-6.9%\n6.8%\n1.2%\n8.3%\n\n\niQIYI\n-31.7%\n-20.2%\n-13.2%\n-3.8%\n\n\nJOYY\n10.2%\n9.4%\n10.4%\n12.3%\n\n\nWeibo\n33.9%\n28.6%\n28.1%\n31.0%\n\n\nBilibili\n-21.4%\n-25.9%\n-18.2%\n-4.0%\n\n\nKuaishou Tech\n1.8%\n-18.4%\n-7.9%\n7.1%\n\n\nAverage\n-1.2%\n0.1%\n2.3%\n9.7%\n\n\nSource: Author, from Company data, Yahoo Finance, Marketscreener\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Analysis\n\n\nCompanies\nEV/S (2019)\nEV/S (2020)\nEV/S (2021E)\nEV/S (2022E)\n\n\nBaidu\n4.8\n4.8\n3.8\n3.3\n\n\nDouYu\n2.9\n2.1\n1.9\n1.6\n\n\niQIYI\n5.4\n5.3\n4.6\n4.0\n\n\nJOYY\n1.8\n1.7\n1.5\n1.3\n\n\nWeibo\n6.8\n7.2\n6.0\n5.4\n\n\nBilibili\n38.5\n21.7\n12.8\n8.9\n\n\nKuaishou Tech\n29.5\n19.6\n12.3\n8.4\n\n\nAverage\n12.8\n8.9\n6.1\n4.7\n\n\nSource: Author, from Company data, Yahoo Finance, Marketscreener\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Sensitivity Analysis (Implied EV)\n\n\n(million RMB)\nEV/S;2022E\n\n\nLow\nBase\nHigh\n\n\n9.4\n10.4\n12.5\n\n\nLow\n3,315\n31,030\n34,478\n41,373\n\n\nEstimated sales (million RMB); 2022E\nBase\n3,683\n34,478\n38,308\n45,970\n\n\nHigh\n4,052\n37,925\n42,139\n50,567\n\n\nSource: Our Estimates\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Sensitivity Analysis (Implied Market Cap)\n\n\n(million RMB)\nEV/S; 2022E\n\n\nLow\nBase\nHigh\n\n\n9.4\n10.4\n12.5\n\n\nLow\n3,315\n38,807\n42,255\n49,150\n\n\nEstimated sales (million RMB); 2022E\nBase\n3,683\n42,255\n46,086\n53,747\n\n\nHigh\n4,052\n45,703\n49,917\n58,344\n\n\nSource: Our Estimates\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Sensitivity Analysis (Implied Market Cap)\n\n\n(US$ million)\nEV/S; 2022E\n\n\nLow\nBase\nHigh\n\n\n9.4\n10.4\n12.5\n\n\nLow\n509\n5,961\n6,491\n7,550\n\n\nEstimated sales (million USD); 2022E\nBase\n566\n6,491\n7,079\n8,256\n\n\nHigh\n622\n7,020\n7,668\n8,962\n\n\nSource: Our Estimates\n\n\n\n\n\n\n\nZhihu Comparable Companies Valuation Sensitivity Analysis (Implied Price Per Share)\n\n\n(US$)\nEV/S; 2022E\n\n\nLow\nBase\nHigh\n\n\n9.4\n10.4\n12.5\n\n\nLow\n509\n10.1\n11.0\n12.8\n\n\nEstimated sales (million USD); 2022E\nBase\n566\n11.0\n12.0\n14.0\n\n\nHigh\n622\n11.9\n13.0\n15.2\n\n\nSource: Our Estimates\n\n\n\nZhihu Income Statement Forecast\nWe estimate the company's sales to increase by 74.9% YoY to reach 2.36 billion RMB in 2021 and increase by 55.8% YoY to reach 3.68 billion RMB in 2022. From 2020 to 2025, we estimate the company's sales to increase at a CAGR of 43.4%. We have assumed Zhihu to start generating positive operating margins in 2024 (4.8%) and have assumed its operating margin to increase to 10.1% in 2025. We have assumed the company's sales to reach 8.21 billion RMB ($1.26 billion) and operating profit of 0.83 billion RMB ($0.13 billion) in 2025.\nSales Breakdown\nAdvertising and paid memberships account for the biggest portion of the company's revenues. Advertising accounted for 86.1% and 62.4% of total revenues in 2019 and 2020, respectively. We estimate advertising as a percentage of revenues to gradually decline in the next five years as it is offset by the faster growing Paid Memberships and Content Commerce Solutions. We estimate advertising as a percentage of sales to decline to 34.1% in 2021 and 22.3% in 2025.\nPaid Memberships represented 13.1% of total revenues in 2019, which increased to 23.7% of total revenues in 2020. We have assumed Paid Membership revenues as a percentage of total revenues to increase to 31.5% in 2021 and 37.8% in 2025.\nContent Commerce Solutions and Other sales also increased sharply in 2020. Content Commerce Solutions revenues jumped from 0.6 million RMB in 2019 to 135.8 million RMB in 2020. In early 2020, the company launched Content-Commerce solutions, which provide merchants and brands a one-stop shop for all of their sales and marketing needs, including marketing plans. We have assumed Content Commerce Solutions as a percentage of total revenue to jump from 10% in 2020 to 17.8% in 2021 and 32.3% in 2025.\nGross Margins\nThe company's gross margins improved from 46.6% in 2019 to 56.0% in 2020, driven by an overall improving business scalability. We have assumed further improvements in gross margins to 57.4% in 2021 and 62.3% in 2025.\nTotal Operating Expenses and Operating Margins\nTotal operating expenses as a percentage of revenues declined significantly from 204.4% in 2019 to 100.6% in 2020. We expect this ratio to improve further to 79% in 2021, 69.2% in 2022, and 57.2% in 2025. The bulk of the improvements in operating expenses is coming from lower SG&A and R&D expenses as a percentage of revenues in the next five years.\n\n\n\n\nZhihu Income Statement Forecast\n\n\n(RMB mn)\n2019\n2020\n2021E\n2022E\n2023E\n2024E\n2025E\n\n\nRevenue\n670.5\n1,352.2\n2,364.8\n3,683.3\n5,180.8\n6,691.5\n8,212.6\n\n\nAdvertising\n577.4\n843.3\n1,076.2\n1,254.6\n1,441.8\n1,635.4\n1,833.0\n\n\nPaid Membership\n88.0\n320.5\n743.8\n1,333.4\n1,967.6\n2,529.0\n3,106.3\n\n\nContent Commerce Solutions\n0.6\n135.8\n421.0\n863.0\n1,406.7\n2,027.1\n2,652.8\n\n\nOthers\n4.5\n52.7\n123.7\n232.3\n364.8\n500.0\n620.5\n\n\nCost of Revenue\n358.2\n594.4\n1,008.3\n1,523.4\n2,078.5\n2,604.0\n3,100.1\n\n\nGross Profit\n312.3\n757.8\n1,356.5\n2,159.9\n3,102.3\n4,087.4\n5,112.5\n\n\nSG&A Expenses\n766.5\n734.8\n963.7\n1,275.9\n1,525.5\n1,773.2\n1,958.7\n\n\nR&D Expenses\n351.0\n329.8\n490.2\n725.3\n969.2\n1,189.2\n1,386.6\n\n\nG&A Expenses\n253.3\n296.2\n414.3\n548.6\n655.9\n804.7\n938.3\n\n\nTotal Operating Expenses\n1,370.7\n1,360.7\n1,868.3\n2,549.8\n3,150.5\n3,767.2\n4,283.6\n\n\nLoss from Operations\n-1,058.5\n-602.9\n-511.8\n-389.9\n-48.2\n320.2\n828.9\n\n\nNon-Operating Items\n54.3\n86.4\n103.5\n51.8\n31.1\n18.6\n11.2\n\n\nEarnings Before Tax\n-1,004.2\n-516.5\n-408.3\n-338.2\n-17.2\n338.9\n840.1\n\n\nIncome Tax\n0.0\n1.1\n0.0\n0.0\n0.0\n0.0\n0.0\n\n\nNet Loss\n-1,004.2\n-517.6\n-408.3\n-338.2\n-17.2\n338.9\n840.1\n\n\n\n% of Sales\n2019\n2020\n2021E\n2022E\n2023E\n2024E\n2025E\n\n\nRevenue\n100.0%\n100.0%\n100.0%\n100.0%\n100.0%\n100.0%\n100.0%\n\n\nAdvertising\n86.1%\n62.4%\n45.5%\n34.1%\n27.8%\n24.4%\n22.3%\n\n\nPaid Membership\n13.1%\n23.7%\n31.5%\n36.2%\n38.0%\n37.8%\n37.8%\n\n\nContent Commerce Solutions\n0.1%\n10.0%\n17.8%\n23.4%\n27.2%\n30.3%\n32.3%\n\n\nOthers\n0.7%\n3.9%\n5.2%\n6.3%\n7.0%\n7.5%\n7.6%\n\n\nCost of Revenue\n53.4%\n44.0%\n42.6%\n41.4%\n40.1%\n38.9%\n37.7%\n\n\nGross Profit\n46.6%\n56.0%\n57.4%\n58.6%\n59.9%\n61.1%\n62.3%\n\n\nSG&A Expenses\n114.3%\n54.3%\n40.8%\n34.6%\n29.4%\n26.5%\n23.8%\n\n\nR&D Expenses\n52.3%\n24.4%\n20.7%\n19.7%\n18.7%\n17.8%\n16.9%\n\n\nG&A Expenses\n37.8%\n21.9%\n17.5%\n14.9%\n12.7%\n12.0%\n11.4%\n\n\nTotal Operating Expenses\n204.4%\n100.6%\n79.0%\n69.2%\n60.8%\n56.3%\n52.2%\n\n\nLoss from Operations\n-157.9%\n-44.6%\n-21.6%\n-10.6%\n-0.9%\n4.8%\n10.1%\n\n\n\n% Change YoY\n2020\n2021E\n2022E\n2023E\n2024E\n2025E\n\n\nRevenue\n101.7%\n74.9%\n55.8%\n40.7%\n29.2%\n22.7%\n\n\nAdvertising\n46.0%\n27.6%\n16.6%\n14.9%\n13.4%\n12.1%\n\n\nPaid Membership\n264.2%\n132.1%\n79.3%\n47.6%\n28.5%\n22.8%\n\n\nContent Commerce Solutions\n21118.8%\n210.0%\n105.0%\n63.0%\n44.1%\n30.9%\n\n\nOthers\n1081.6%\n135.0%\n87.8%\n57.0%\n37.1%\n24.1%\n\n\nCost of Revenue\n65.9%\n69.6%\n51.1%\n36.4%\n25.3%\n19.1%\n\n\nGross Profit\n142.7%\n79.0%\n59.2%\n43.6%\n31.8%\n25.1%\n\n\nSG&A Expenses\n-4.1%\n31.2%\n32.4%\n19.6%\n16.2%\n10.5%\n\n\nR&D Expenses\n-6.1%\n48.7%\n48.0%\n33.6%\n22.7%\n16.6%\n\n\nG&A Expenses\n16.9%\n39.9%\n32.4%\n19.6%\n22.7%\n16.6%\n\n\nTotal Operating Expenses\n-0.7%\n37.3%\n36.5%\n23.6%\n19.6%\n13.7%\n\n\nLoss from Operations\n-43.0%\n-15.1%\n-23.8%\n-87.6%\nTB\n158.8%\n\n\nSource: Author, from Company data; TB = turned black\n\n\n\nSource: Author, from Company data, Our Estimates\nSource: Author, from Company data, Our Estimates\nSource: Author, from Company data, Our Estimates\nCompany Background\nAt the end of 2020, Zhihu had more than 43.1 million cumulative content creators that contributed 315 million questions and answers. In 4Q 2020, the company had 75.7 million average monthly active users, up 33% YoY. One of the key strengths of the company is that it is recognized as one of the most trustworthy online content communities and regarded as providing one of the highest quality content in China. Zhihu has tried to capitalize on its large user base to provide numerous multimedia functions including live streaming, e-commerce, online education, and other video content.\nIn August 2019, Zhihu received $434 million in funding from leading investors including Baidu and Kuaishou Technology, valuing the company at $3.5 billion. Given that the company had $97 million in sales in 2019, this would suggest a P/S valuation multiple of 36x. If we take the same P/S multiple apply to the company's 2020 sales of $207 million, this would suggest an implied valuation of $7.5 billion.\nZhihu was originally developed as a question and answer online community in 2010. At the end of 2020, there were a total of 315 million Q&As spanning more than 1,000 verticals and 571,000 topics. Zhihu is one of the top five comprehensive online content communities in China, in terms of average mobile MAUs and revenue in 2020. The company uses artificial intelligence, cloud, and big data algorithms to improve the optimization of its content and services.\nMajor Shareholders of Zhihu\nThe founder & CEOZhou Yuanowns an 8.2% stake in the company (but 46.6% voting rights). Sinovation Ventures owns a 13.1% stake and Tencent Holdings Ltd. owns a 12.3% stake of Zhihu.\nKey Demographics\nThe diagram below provides some of the key demographics of Zhihu user base. Males accounted for 56.9% of total users. People under 30 years old accounted for 78.7% of its total user base. Tier I and new tier I cities represented 52.6% of total user base. Many of the users of Zhihu are students and white collar professionals.\nSource: Author, from Company data\nRevenue Breakdown\nAdvertising and paid memberships account for the biggest portion of the company's revenues. Advertising accounted for 86.1% and 62.4% of total revenues in 2019 and 2020, respectively. The company's advertising revenue is mainly driven by its MAUs and advertising revenue per MAU. The company's MAUs increased by 42.7% YoY to 68.5 million in 2020. The company started its online advertising business in 2016 and introduced paid content in 2018.\nPaid memberships represented 13.1% of total revenues in 2019, which increased to 23.7% of total revenues in 2020. Average monthly members jumped by 311.5% YoY to 2.36 million in 2020, which is a testament of an increasing number of customers that value the premium content available on Zhihu.\nIn March 2019, the company introduced the Yan Selection membership program, making it the first payment-based questions & answers community. It provides its members with unlimited access to about 3.4 million paid content including online lectures, columns, audio books, and e-journals. This is one of the biggest strengths of the company as it shows how high quality data and content can generate serious amount of revenues and it also provides a more steady monthly revenue inflow.\nContent Commerce Solutions and Other sales also increased sharply in 2020. Content Commerce Solutions revenues jumped from 0.6 million RMB in 2019 to 135.8 million RMB in 2020. In early 2020, the company launched Content-Commerce solutions, which provide merchants and brands a one-stop shop for all of their sales and marketing needs, including marketing plans, assigning the most relevant content creators to interested users, and facilitating content creation.\nChina's content-commerce solution market is expected to be one of the fastest growing sectors in the next several years. According to CIC Consultancy, China's content-commerce solution market is expected to enjoy a strong CAGR growth of 46.4% from 2019 to 2025 (112.3 billion RMB).\nMarket Opportunities\nChina’s Online Content Communities Market Size\nOnline content communities refer to UGC (user generated content)-focused (including PUGC (professional user generated content) focused online content market players where content creators are also users, who are actively engaged within the communities. The content communities generally can stimulate higher level of user engagement, more interactive user experience, and enjoy lower content cost, compared to PGC (professionally generated content) players. PGC is content created by the branded company or organization.\nChina's online content communities market size increased from 38.6 billion RMB in 2015 to 275.8 billion RMB in 2019 and is further expected to rise to 1.3 trillion RMB in 2025, representing a CAGR of 30.3% from 2019 to 2025, which is higher than the overall online content market growth.\nChina's online content community market has more diversified monetization channels including online advertising, paid membership, content e-commerce, content-commerce solutions, virtual gifting in live streaming, online games, and online education services. In comparison, the US online content community's monetization is mainly through advertising.\nOne of the major positives about the company is the growing trend of more Chinese consumers that are willing to pay money for higher quality content. The number of paying users in China’s online content communities is expected to increase at a CAGR of 17.1% between 2019 and 2025, which means an increase of 360.4 million extra paying users of online content communities to 588.2 million in 2025.\nChina's Online Content Market\nChina's online content market tripled from 2015 to reach 1.2 trillion RMB in 2019. This market is expected to increase to 3.7 trillion RMB in 2025, representing a CAGR of 21.4% from 2019 to 2025.\nChina’s Online Content Market Size (in terms of revenue), 2015-2025E\nSource: CIC Report\nMarket Size of China’s Online Content Communities (in terms of revenue),2015-2025E\nSource: CIC Report\nChina’s Paid Membership Market Size (in terms of revenue), 2015-2025E\nSource: CIC Report\nContent-commerce solutions\nTo provide integrated marketing services, the online content communities provide content-commerce solutions for content creation, content distribution, and content conversion. The company provides integrated content-commerce solutions, providing merchants and brands one-stop services for all their sales and marketing needs, from making marketing plans, facilitating content creation, assigning the most relevant content creators, to distributing to the interested users. China's content commerce solution market is expected to grow from 11.4 billion RMB in 2019 to 112.3 billion RMB in 2025, at a CAGR of 46.4%.\nChina’s Content-Commerce Solution Market Size (in terms of revenue), 2015-2025E\nSource: CIC Report\n\nEmployees- At the end of 2020, the company had 1,651 full time employees, all of whom were based in China, primarily at its headquarters in Beijing, China.\n\n\n\n\nZhihui Employees Breakdown (At the end of 2020)\n\n\nFunction\nNumber of employees\n% of Total Employees\n\n\nContent and Content-Related Operations\n461\n27.9%\n\n\nResearch and Development\n672\n40.7%\n\n\nSales and Marketing\n337\n20.4%\n\n\nGeneral Administration\n181\n11.0%\n\n\nTotal\n1,651\n100.0%\n\n\nSource: Company data\n\n\n\nKey Investment Risks\n\nPost COVID-19 environment - The COVID-19 has had a positive impact on the company as millions of people in China spent more time at home and increased their time on the Internet and mobile phones which led to usage of more Internet services such as Zhihu. Although the COVID-19 situation currently is not as dire as a year ago, there are still numerous social distancing measures. In the post COVID-19 environment, this could lead to a slower growth rate of its sales and profit improvement.\nCensorship related risks - Given that Zhihu is one of the largest Q&A websites in China, it is likely to face numerous censorship related issues from the Chinese government and this remains one of the key risk factors.\nRecent share price declines of Chinese tech giants and Chinese tech IPOs in the US - There have been some big declines in share prices of several Chinese tech giants includingAlibaba Group (9988 HK)andTencent Holdings (700 HK). Share prices of other Chinese tech giants such as JD.com and Meituan have also declined in the past few weeks but not as much as Alibaba and Tencent. In addition,Cloopen Group Holding Ltd. (RAAS US),which recently completed its IPO in February saw its share price surge in the first day but it has dropped by more than 50% since then.\nMostly text-based content platform - For now, most of Zhihu's content tend to be text-based, although the company is offering more video and non-text-based content. For the users that prefer non-text-based content, this could deter some people from becoming paid members or users of Zhihu. However, the company is actively making efforts to provide more videos, live streaming, and other non-text-based content. These efforts to provide a more diversified source of content could result in higher operating costs.\nLack of profitability - Despite strong sales growth, the company remains unprofitable with an operating margin of -44.6% in 2020.","news_type":1},"isVote":1,"tweetType":1,"viewCount":214,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":2,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}