Yatsen Holding (YSG)YSG

Yatsen Holding: A Comprehensive Overview

Company Profile:

History and Background: Yatsen Holding, previously known as Yuze Group, was founded in 2014 by Huang Jinfeng and Dong Zejun. It started with a focus on e-commerce, becoming the first beauty brand in China to achieve a valuation of over $1 billion solely through online channels. The company officially went public on the New York Stock Exchange in November 2020 under the ticker symbol YSG.

Core Business Areas: Yatsen Holding operates through two primary segments:

• Brand Portfolio: This includes four core brands, each targeting different segments of the beauty market: Perfect Diary (young mass-market), Little Ondine (affordable color cosmetics), Abby's Choice (fragrance and personal care), and Galénic (high-end skincare).
• Sales Channels: Yatsen primarily relies on online platforms like Alibaba's Tmall and JD.com, with a growing presence in physical retail channels.

Leadership and Corporate Structure: The company is led by founder and CEO Jinfeng Huang, and CFO Vincent Zou. The management team also includes experienced executives from various industries like e-commerce, marketing, and finance. The corporate structure comprises various departments, including research and development, marketing, supply chain, and finance.

Top Products and Market Share:

Top Products: Yatsen's product portfolio is extensive and includes skincare, color cosmetics, fragrance, and personal care products. Some of the best-selling products include Perfect Diary's Animal Lipstick Series, Little Ondine's Cherry Lip Mask, and Galénic's Ophycée Anti-aging Cream.

Market Share: Yatsen Holding holds a significant market share within China's beauty industry. Perfect Diary, their flagship brand, is estimated to have the highest market share in the color cosmetics segment, surpassing L'Oréal China in 2017. However, the overall market share for Yatsen Holding in the global cosmetics industry is relatively small compared to established giants like L'Oréal, Estée Lauder, and Unilever.

Market Reception: Yatsen's products have generally received positive feedback from consumers, particularly within China. Perfect Diary is known for its trend-driven, high-quality products at accessible prices, resonating with young consumers. Little Ondine is favored for its affordability and focus on color cosmetics, while Galénic is recognized for its luxurious skincare solutions.

Total Addressable Market: The global cosmetics market was valued at USD 511.4 billion in 2021 and is projected to reach USD 805.61 billion by 2028, growing at a CAGR of 7.14%. China represents a significant market, contributing to nearly 25% of global market share in 2021.

Financial Performance:

Recent Performance: Yatsen's financial performance has been mixed in recent years. In 2022, the company reported revenue of USD 824.2 million, a decrease of 10.5% year-over-year. Net income was also down at USD 12.2 million compared to USD 83.4 million in 2021. This decline can be attributed to several factors like increased competition, economic slowdown in China, and rising marketing costs.

Profit Margins and EPS: Yatsen's gross margin has remained relatively stable between 68% to 70% in recent years. However, operating margins and net profit margins have declined, reaching -4.2% and 1.5%, respectively, in 2022. EPS also decreased significantly from USD 0.63 in 2021 to USD 0.09 in 2022.

Cash Flow and Balance Sheet: The company has experienced negative free cash flow in recent years due to increased investments in marketing and research and development. The balance sheet shows a debt-to-equity ratio of 1.5, indicating a moderately high level of debt, but manageable within the cosmetic industry.

Dividends and Shareholder Returns: Yatsen Holding currently does not pay any dividends. Since their IPO, shareholder returns have been negative due to the stock price decline.

Growth Trajectory and Future Potential:

Historical Growth: Yatsen experienced rapid growth in its early years, driven by the success of Perfect Diary and its online marketing strategies. Between 2016 and 2020, the company's revenue grew by an impressive 932%.

Future Projections: Y