China cosmetics brand Perfect Diary files for US IPO

The company has raised more than $700 million across six funding rounds. ZhenFund led the angel and Series A rounds with Gaorong joining the Series B. Hillhouse has been involved from Series C onwards and is the largest external shareholder with a 13.8% stake. ZhenFund and Gaorong own 10.5% and 9.2%, respectively. Jinfeng Huang, Perfect Diary's founder retains a majority voting interest through a dual share class structure.

There have been two funding rounds this year, according to the prospectus. In March, Boyu Capital, Gaorong, Hillhouse, Hopu Investment, Longhu Capital, Tiger Global Management and VMG Partners participated in a Series D. This was followed by a Series E led by The Carlyle Group and Warburg Pincus, and featuring Loyal Valley Capital, CMC Group, and Hony Capital, among others.

Launched in 2017, Perfect Diary has become China's largest color cosmetics brand by retail sales value in 2019. Yatsen acquired Shanghai-based Little Ondine last year and within eight months achieved the same level of monthly gross sales as Perfect Diary did in its first 12 months. A third brand, Abby’s Choice, launched in 2020. It took three months to reach the same sales target.

These three brands together serve more than 23 million customers. Gross sales reached RMB3.8 billion ($567 million) in the first nine months of 2020 - compared to RMB3.5 billion for the full 12 months of 2019 - with 90% coming through online channels.

Perfect Diary's revenue increased from RMB635.3 million in 2018 to RMB3 billion in 2019 and hit RMB3.3 billion in 2020 through September. While the gross profit margins have been high in recent years - more than 60% - the company is not consistently profitable. Net income came to RMB75.4 million last year compared to a loss of RMB40.1 million in 2018. For the first nine months of 2020, it posted a loss of RMB1.15 billion, largely due to a substantial increase in sales and marketing expenditure.

This expenditure went towards promoting the two new brands and also accelerating the roll-out of offline stores. Perfect Diary spent RMB196.4 million in the first nine months to open 163 outlets. In 2019, 40 outlets were opened at a cost of RMB52.9 million.

A fourth brand will be launched imminently. In October, Yatsen agreed to buy skincare brand Galénic from Pierre Fabre, a French pharmaceutical and dermo-cosmetics group.

The company attributes its rapid growth to a digitally native direct-to-customer (DTC) business model new to China’s beauty industry. Perfect Diary has an in-house team of over 200 engineers dedicated to technology and data. It has developed a digital infrastructure that comprises a database of customer insights, social marketing engines, and a user interface platform.

“Massive e-commerce platforms such as Tmall, JD.com and Vipshop have become default shopping destinations. More recently, disruptive and dynamic social and content platforms such as Weixin, Douyin, Kuaishou, Bilibili and Red have been playing an increasing role in consumers’ discovery and purchase of beauty products,” Perfect Diary observed in the prospectus.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Consumer
• Technology
• IPO
• China
• Tiger Global Management
• e-commerce
• Boyu Capital
• Hopu Investment Management
• Hillhouse Capital Management
• ZhenFund
• Gaorong Capital
• TMT
• China Media Capital