Prioritizing breakeven target

Investment Rating - The report maintains a "BUY" rating for Zhihu with a target price adjusted to US$1.8, reflecting a potential upside of 153.5% from the current price of US$0.71 [4][24]. Core Insights - Zhihu's 4Q23 results exceeded expectations with a revenue increase of 2.2% YoY, driven by strong performance in marketing services and vocational training, while the adjusted net loss narrowed to RMB91 million [2][3]. - For FY24E, the management is prioritizing margin improvement and has set a breakeven target for 4Q24E, despite forecasting a 10% decline in total revenue [2][3]. - The company is expected to leverage its user data and analytics capabilities to benefit from AIGC trends, while focusing on high-margin vocational training subjects [2][3]. Financial Summary - Revenue for FY23 was RMB4,199 million, with a forecasted decline to RMB3,798 million in FY24E, followed by a slight recovery to RMB4,089 million in FY25E [20]. - Adjusted net profit is projected to improve from a loss of RMB659.1 million in FY23 to a loss of RMB226.1 million in FY24E, with a return to profitability expected in FY25E [20][21]. - The gross margin is expected to remain stable at around 54.6% in FY24E, with operating margins improving as the company focuses on cost discipline [20][22]. Revenue Breakdown - The revenue forecast for FY24E includes a 20% decline in marketing services, while membership revenue is expected to remain flat and vocational training revenue is projected to grow by 5% [2][3]. - The company has repurchased 26.3 million Class A ordinary shares for US$58.5 million as part of its buyback program [2][3]. Market Position - Zhihu is well-positioned to capture growth opportunities in the AIGC sector, leveraging its extensive user data and analytics capabilities [2][3]. - The company is focusing on strategic adjustments to its business model, particularly in its marketing services and vocational training segments, to enhance profitability [2][3].