Escape emotions and return to value.
On 11 April 2022, Zhihu officially submitted a prospectus to the Hong Kong Stock Exchange for listing on the main board of the Hong Kong Stock Exchange, and is expected to become the first Chinese-listed Internet company to return to Hong Kong by way of dual major listing.
It is worth noting that the prospectus discloses that Zhihu plans to offer 26 million Class A ordinary shares of the company on the Hong Kong Stock Exchange, all of which are from early investors, which means that Zhihu has no purpose of raising funds in Hong Kong.
Industry insiders believe that the value of Chinese stocks is generally undervalued by the market, and Zhihu is also among them. If the issuance of new shares in the current environment will greatly dilute the existing shareholders, zhihu's approach is to protect the interests of the current shareholders, but also express confidence in the intrinsic value of the company.
In the past year, overseas Chinese stocks have suffered an unprecedented drawdown. The WIND U.S. stock Chinese mainland index (denominated in U.S. dollars) has fallen 70% since its February 2021 high. According to Oriental Wealth Choice data, 42 Chinese stocks have fallen by more than 90% in the past year, and 111 have fallen by more than 80%.
It is precisely because of its insistence on intrinsic value and its desire to break the game that among the Internet companies, Zhihu took the lead in embarking on the road of returning to Hong Kong stocks.
1
Secondary Listing VS. Dual Listing
In the return to Hong Kong listing, there is a difference between "secondary listing" and "double listing".
Secondary listing refers to a company listing the same type of shares in two places, through custodians and brokers to achieve cross-market circulation of shares. Secondary listed companies are already listed on exchanges recognized by the Hong Kong Stock Exchange, so they do not need to meet the listing conditions stipulated by the Hong Kong Stock Exchange again, but this also means that once these companies are delisted in the United States, their listing status in Hong Kong stocks may be affected, and there is uncertainty.
Dual listing means that a company is listed in the Hong Kong market in accordance with local market rules when it has been listed on the US market, and both capital markets are the first listing places. In this case, dual listed companies are subject to the same rules as companies that have issued shares in Hong Kong for an initial public offering, and Hong Kong stocks can still be traded even if they are delisted from the US stock market.
In contrast, the rules required for dual listing are more stringent, and the shares of the two places are not convertible to each other, and there is a price difference. However, "mutual independence" from U.S. stocks also means that it can be listed as a target of interconnection and enter the list of Hong Kong Stock Connect.
In November 2021, the Hong Kong Stock Exchange promulgated new rules on the listing system for overseas issuers, lowering the threshold for secondary listing and double listing, and making a number of optimizations for the main listing of VIE structure companies and the exemption after delisting of overseas listed entities.
At present, 20 Chinese stocks have returned to the Hong Kong Stock Exchange for listing, of which BeiGene and Huang Pharmaceutical have completed the dual listing of Hong Kong, and the "new force" ideal car and Xiaopeng Automobile will also be double-listed in Hong Kong in 2021.
In the face of continued overseas regulatory risks, more and more eligible companies may gradually choose to return to Hong Kong for listing in the future. In terms of return methods, in order to protect the interests of investors, a more independent dual listing may become the choice of more and more companies.
2
Value reinvention
Knowing that the dual listing of Hong Kong is to avoid regulatory risks on the one hand, and to seek value reshaping on the other hand.
As mentioned earlier, U.S.-China stocks have experienced more than a year of downturn, and their performance has departed from fundamentals and fallen into the emotional side.
Looking at the latest financial report data released by Zhihu, the fourth quarter performance of Zhihu in 2021 has exceeded market expectations, and the annual revenue has doubled, but the stock price has not improved.
According to the financial report, the total revenue of Zhihu in 2021 reached 2.959 billion yuan (RMB, the same below), an increase of 118.9% year-on-year, of which the fourth quarter revenue was 1.019 billion yuan, an increase of 96.1% year-on-year.
The sharp increase in revenue was mainly due to the increasing user scale and the increase in the average revenue per user. In the fourth quarter of 2021, the average monthly active users (MAUs) of Zhihu were 103 million, an increase of 36.4% year-on-year, and the average number of monthly paid members was 6.1 million, an increase of 102% year-on-year.
At the same time as the income is doubled, the income structure of Zhihu is also being further optimized. According to the financial report, Zhihu's revenue mainly includes online advertising, commercial content solutions, paid membership and other businesses such as online education and e-commerce. In 2021, The proportion of non-advertising business revenue with content as the core reached 61%, while advertising revenue maintained a growth rate of 37.7%, and the revenue growth of commercial content solutions was as high as 617%.
This shows that with less reliance on the advertising business, the content-centric business model is becoming the growth engine of Zhihu revenue. In 2021, Zhihu clearly proposed that the "sense of acquisition" should be used as the first criterion for content, and the data also confirmed the feasibility of this model.
In terms of profitability, Zhihu also maintained a high level of gross profit, with a gross profit margin of 52.5% for the whole year and a gross profit of 1.554 billion yuan, an increase of 105.1% year-on-year. As at 31 December 2021, Zhihu held cash and cash equivalents, term deposits and short-term investments totaling $7.4 billion.
Whether it is in terms of revenue, profitability or risk resistance sustainability, Zhihu has handed over an excellent report card, but has not received positive feedback.
Therefore, for Zhihu, instead of getting caught up in overseas sentiment, it is better to return to the market that knows Zhihu better and let its true value be discovered.
In fact, the undervaluation of overseas Chinese stocks is not a new thing. The low awareness of Chinese companies in the overseas environment and the frequent activities of short-selling institutions are pushing Chinese stocks to the marginal.
Nowadays, driven by the general trend, the team of Returning To Hong Kong is growing day by day, which should be a new starting point worth looking forward to, both for investors and the company.
*The above content is a third-party product announcement, does not constitute investment advice, and does not represent the views of the publishing platform. Users should consider whether any opinions, opinions or conclusions contained herein are consistent with their particular investment objectives, financial situation or needs. The market is risky, investment needs to be cautious, please judge and make decisions independently.