Stock Analysis & Valuation Zhihu Inc. (2390.HK)

• Previous Close: HK$9.60
• Sector Valuation Confidence Level: High

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	53.00	452
Intrinsic value (DCF)	11.89	24
Graham-Dodd Method	12.60	31
Graham Formula	3.70	-61

Strategic Investment Analysis

Company Overview

Zhihu Inc. (2390.HK) is a leading Chinese online content community platform often described as 'China's Quora,' operating one of the country's most influential knowledge-sharing ecosystems. Founded in 2010 and headquartered in Beijing, Zhihu has evolved into a comprehensive Q&A platform where users seek inspiration, find solutions, make decisions, and engage in intellectual discussions across diverse topics. The company operates in the Internet Content & Information industry within the Communication Services sector, generating revenue through advertising, paid memberships, content-commerce solutions, and vocational training services. With its unique positioning as a premium knowledge community, Zhihu has cultivated a user base of educated professionals and subject matter experts, creating valuable intellectual property through user-generated content. The platform's depth of expertise across technology, business, academia, and lifestyle topics distinguishes it from more entertainment-focused social media platforms, making it an essential destination for quality content seekers in China's digital ecosystem.

Investment Summary

Zhihu presents a high-risk, potentially high-reward investment opportunity characterized by its strong brand recognition in China's knowledge-sharing space but challenged by persistent profitability issues. The company's HKD 3.44 billion market cap reflects investor skepticism despite generating HKD 3.60 billion in revenue, as it reported a net loss of HKD 171.8 million and negative operating cash flow of HKD 280.2 million for the period. While the company maintains a strong balance sheet with HKD 4.0 billion in cash and minimal debt (HKD 19.1 million), the lack of clear path to profitability and negative EPS of -0.63 HKD raise concerns. The low beta of 0.222 suggests relative insulation from market volatility, but investors should weigh the company's premium community positioning against intense competition from larger tech platforms and ongoing monetization challenges in China's restrictive content environment.

Competitive Analysis

Zhihu's competitive advantage stems from its first-mover status in China's Q&A segment and its cultivated reputation as a premium knowledge community. The platform has successfully attracted educated professionals, academics, and industry experts who contribute high-quality content, creating significant barriers to entry through network effects. Unlike broader social media platforms, Zhihu's focus on depth and expertise has allowed it to maintain a distinctive positioning in the Chinese internet landscape. However, the company faces intense competition from larger technology platforms with substantially greater resources. Weibo's massive user base and stronger monetization capabilities, Baidu's dominance in search-driven Q&A, and Bilibili's appeal to younger demographics all challenge Zhihu's market position. The company's monetization efforts through advertising, paid content, and vocational training must compete against these deeply entrenched players who can cross-subsidize their Q&A offerings. Additionally, Zhihu's content moderation costs and compliance requirements in China's tightly regulated internet environment create operational challenges that may hinder growth and innovation compared to more specialized or international competitors.

Major Competitors

• Weibo Corporation (WB.O): Weibo operates China's leading microblogging platform with significantly larger scale and stronger monetization capabilities than Zhihu. Its strengths include massive user base, superior advertising technology, and broader content diversity including entertainment and news. However, Weibo's content tends to be more superficial and entertainment-focused compared to Zhihu's depth, and it faces greater regulatory scrutiny as a public social platform. Weibo's scale advantages in advertising and live streaming create intense competition for user attention and advertiser budgets.
• Baidu, Inc. (9888.HK): Baidu dominates China's search engine market and operates Baidu Knows, a massive Q&A platform integrated with search results. Its strengths include unparalleled search traffic, AI capabilities, and extensive resources for content aggregation. However, Baidu Knows content quality is generally lower than Zhihu's curated expert responses, and the platform suffers from spam and commercial content. Baidu's integration with search gives it massive scale but less community engagement compared to Zhihu's dedicated knowledge ecosystem.
• Bilibili Inc. (9626.HK): Bilibili operates a video-centric community popular among younger Chinese users with strong engagement around ACG (animation, comics, games) content. Its strengths include highly engaged user base, superior video capabilities, and strong brand loyalty among Gen Z. However, Bilibili's content is more entertainment-focused than Zhihu's knowledge-oriented platform, and it faces similar profitability challenges. Bilibili's video-first approach competes for user time but serves different content consumption needs compared to Zhihu's text-based Q&A format.
• DouYu International Holdings (DOYU): DouYu is a leading game live streaming platform that competes for user engagement time in China's content ecosystem. Its strengths include dominance in game streaming, strong gamer community, and live interaction features. However, DouYu's content is highly specialized around gaming entertainment rather than general knowledge, and it faces intense competition from Huya and larger platforms. Unlike Zhihu's broad knowledge coverage, DouYu's niche focus limits direct competition but still competes for overall user attention and entertainment budgets.
• Tencent Holdings Limited (TCEHY): Tencent operates numerous content platforms including Q&A services through various products and has massive resources to compete in any content segment. Its strengths include unparalleled financial resources, WeChat integration, and vast user data across multiple platforms. However, Tencent's Q&A efforts are fragmented across different products rather than focused like Zhihu, and the company prioritizes larger opportunities in gaming and social media. Tencent's scale represents a constant threat but its lack of focused Q&A platform creates space for specialized players like Zhihu.