
PE-backed Perfect Diary jumps 75% on debut after $616m IPO

Yatsen Holding, the parent company of Chinese cosmetics brand Perfect Diary, gained 75% on its first day of trading on the New York Stock Exchange following a $616.9 million IPO.
The company, which counts Hillhouse Capital, The Carlyle Group and Warburg Pincus among its backers, sold 58.8 million American Depository Shares (ADS) for $10.50 apiece, the top end of the indicative range. Several investors, including Hillhouse, Tencent Holdings, and Tiger Global Management, committed $300 million to the IPO, according to a filing.
The stock opened at $17.51 on November 19 and reached as high at $20.80 before closing at $18.40.
Hillhouse holds a 13.7% stake in Yatsen, while Gaorong Capital and ZhenFund own 8.4% and 9.5%, respectively. Jinfeng Huang – who founded the business in 2017, having previously worked for Yujiahui, a leading domestic manufacturer of facial sheets – retains a majority voting stake through the dual-class share structure.
Perfect Diary was 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. 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.
Perfect Diary raised more than $700 million across six private funding rounds. ZhenFund led the angel and Series A rounds with Gaorong joining the Series B. Hillhouse has been involved from Series C onwards.
There have been two funding rounds this year, according to the prospectus. In March, Boyu, Gaorong, Hillhouse, Hopu Investment, Longhu Capital, Tiger Global and VMG Partners participated in a Series D. This was followed by a Series E led by Carlyle and Warburg Pincus, and featuring Loyal Valley Capital, CMC Group, and Hony Capital, among others.
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