CICC has issued a research report maintaining its outperform industry rating for Zhihu-W (02390). The firm has revised its revenue forecasts for the company upward for 2026 and 2027, while keeping its non-GAAP net profit projections unchanged.
Revenue estimates for 2026 and 2027 have been increased by 6.5% and 5.8% respectively to RMB 2.64 billion and RMB 2.69 billion, factoring in incremental contributions from IP operations. The current share price implies a price-to-sales ratio of 0.6x for both 2026 and 2027 for the Hong Kong and US-listed shares.
The outperform rating is reiterated. Considering a downward shift in the industry's valuation benchmark, the target price is maintained at HK$9 for the Hong Kong shares and US$3.7 for the US shares, corresponding to 0.7x 2026 P/S. This implies potential upside of 18% for the Hong Kong shares and 22% for the US shares.
CICC's Core Analysis
First-quarter 2026 revenue of RMB 652 million aligned with expectations. Non-GAAP net profit attributable to shareholders surged 147% year-over-year to RMB 17.16 million, surpassing both the firm's and market expectations. This outperformance is attributed primarily to period expense outlays, after adjusting for share-based compensation, coming in slightly below forecasts.
Resilient Core Operations and IP as a New Growth Driver
The company has reclassified its revenue structure starting this quarter to better reflect business operations. Paid content and IP operations revenue grew 16% quarter-over-quarter to RMB 402 million in Q1 2026. The average monthly subscribing members recovered sequentially to 13.1 million, indicating a stabilization and recovery trend in the paying user base. IP operations are estimated to have achieved triple-digit year-over-year growth.
The accelerated development of IP from its "Salt Story" platform into film/TV, short-form dramas, and comic adaptations is generating significant incremental revenue. The proportion of revenue from IP operations is expected to continue rising. Marketing services revenue was RMB 191 million for the quarter, as the company continues proactive optimization of ad products to balance user experience and monetization.
Other business revenue, including professional training, amounted to RMB 57.8 million, continuing a strategic retrenchment in line with the company's focus on profitability and optimizing return on investment.
AI Integration and Monetization Potential
The penetration rate of Zhihu's Q&A community continues to increase. AI capabilities are accelerating integration with community content, creator ecosystems, and the commercialization system. Management indicated that AI application will enter a second phase involving building data platforms and hosting hackathons to become a more open platform.
Furthermore, IP operations are expected to benefit from AI-assisted content distribution and copyright matching, deepening the empowerment of content assetization.
Share Buybacks and Strong Cash Position
The company repurchased approximately US$4.2 million worth of shares in Q1 2026. As of the end of Q1 2026, the combined balance of cash and cash equivalents, term deposits, and short-term investments stood at RMB 4.49 billion. The company stated it remains focused on maximizing long-term shareholder value.
Key Risk Factors
Potential risks include IP operational growth sustainability falling short of expectations; a slower-than-expected recovery in marketing services; a weaker-than-anticipated recovery in paying member growth; and uncertainties surrounding the commercialization progress of AI products.
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