Chapter 1

Yatsen Holding is the Guangzhou beauty group behind Perfect Diary — a November 2020 IPO darling whose shares have fallen about 93% since. It now carries roughly ¥1.0 billion of net cash and no debt, is controlled by its founder (90% of the vote), and in 2025 returned to growth (+27%) with operating losses all but erased. Whether that stabilization is durable, self-funding profitability, or a still-cash-burning turnaround spending its IPO windfall, is what this report tests.

Figures are stated in Renminbi (¥), the currency in which Yatsen reports its financial statements. Where useful, the company's own US-dollar convenience translations and the US-dollar share price are given alongside.

What Yatsen is

Yatsen Holding Limited is a Cayman-incorporated, Guangzhou-headquartered beauty company that develops and sells color cosmetics and skincare through a portfolio of owned brands — Perfect Diary, Little Ondine, Pink Bear and Abby's Choice in cosmetics; Galénic, DR.WU, Eve Lom and others in skincare — and lists on the NYSE as a foreign private issuer, filing on Form 20-F [1]. It sells mostly direct to the consumer online: sales to end customers were 85% of revenue in 2025 [2].

The business reports in two segments. Color Cosmetics — led by Perfect Diary, the brand the company was built on — generated ¥2,005.9 million in 2025. Skincare Brands generated ¥2,277.3 million and, for the first time, is the larger of the two, having grown 63% year on year [3]. That crossover is the company's central operating story: a color-cosmetics business that collapsed after 2021 has been rebuilt around skincare.

Sources: FY2022 20-F, Segment Information [4] for 2021–2022; FY2025 20-F [5] for 2023–2025.

Total revenue tells the fuller arc. Yatsen peaked at ¥5.84 billion in 2021, then nearly halved as Perfect Diary's traffic-bought growth reversed [6]. Revenue bottomed near ¥3.4 billion in 2023–2024 and recovered to ¥4,298.1 million (US$614.6 million) in 2025 — still a quarter below the peak, but the first genuine growth year since the boom broke [7].

The crash

Yatsen priced its IPO at US$10.50 per ADS on November 23, 2020, raising net proceeds of about US$577 million, with each ADS then representing four Class A ordinary shares. The offering drew a marquee syndicate of existing backers — Hillhouse Capital, Tiger Global, Tencent and Yunfeng — subscribing to roughly 37% of the deal [8]. Adjusting for a later change in the ADS ratio to twenty shares, the stock trades near US$3.43, roughly 93% below that IPO price on a per-ordinary-share basis, valuing the equity at about US$320 million.

The decline was severe enough to threaten the listing itself. Yatsen received NYSE notices in April 2022 and again in November 2023 that its ADSs had fallen below the exchange's US$1.00 minimum-price standard; it cured both, the second time by raising the ADS-to-share ratio from four to twenty — a mechanical five-fold lift to the quoted price [9]. For a reader weighing downside, the delisting scare is the scar on the record; the balance sheet below is the reason the company had the room to fix it.

The turnaround, measured

The loss line has narrowed faster than revenue has grown. Reported operating loss fell from ¥928.9 million in 2022 [10] to ¥185.8 million (US$26.6 million) in 2025, and net loss attributable to shareholders fell from ¥815.4 million to ¥80.9 million (US$11.6 million) over the same span [11]. The 2023 and 2024 operating losses each carried a large non-cash goodwill impairment (¥354.0 million and ¥403.1 million); stripping those out, the underlying operating loss still narrowed each year [12].

Sources: FY2023 20-F, Consolidated Statements of Operations [13] for 2022; FY2025 20-F [14] for 2023–2025. Net loss is the amount attributable to Yatsen shareholders; 2023–2024 operating loss includes goodwill impairment.

Two forces drove the improvement. Gross margin climbed from about 68% in 2022 to 78.2% in 2025 as the mix shifted toward higher-priced skincare [15]. The counterweight is that selling and marketing still absorbed 66% of revenue in 2025 — the legacy of a business model built on buying online traffic, and the single clearest reason the company has not yet reached breakeven despite a nearly 80% gross margin [16]. The read here is that the turnaround is real in the accounting but not yet proven in cash: what would settle it is a year in which marketing intensity falls without revenue stalling.

The balance sheet, and where the cash went

The reason the equity is worth studying at this price is the balance sheet. At the end of 2025 Yatsen held ¥765.4 million of cash and equivalents plus ¥246.0 million of short-term investments — roughly ¥1.0 billion (about US$145 million) of liquid assets against no bank borrowings [17]. Against a market value near US$320 million, net cash is close to half the price, and the company also carries a further ¥653.6 million of longer-term investments not counted here [18].

That cash pile has been shrinking, and it matters how. Liquid assets fell from about ¥2.6 billion at the end of 2022 to ¥1.05 billion at the end of 2025. Of that decline, the larger part was deliberate capital return: Yatsen spent roughly ¥730 million buying back stock over 2023–2025, and operations consumed a further ¥446 million; operating cash flow was negative in each of the three years (−¥94.7 million in 2025) [19].

Source: derived from FY2025 20-F, cash-flow and balance-sheet data [20].

The buybacks have been substantial relative to the company's size: 40.2 million ADSs repurchased for US$202.2 million through February 2026 — a sum on the order of two-thirds of the entire current market capitalization [21]. The favorable read is a management team retiring stock at depressed prices; the caution is that a loss-making company has been returning capital while still burning it in operations, and the newest program, authorized in 2025, is far smaller (US$30 million) than its predecessors.

Founder control

Yatsen is a founder-controlled company. Jinfeng (David) Huang — founder, chairman and CEO — held 32.0% of the shares but 90.4% of the voting power as of February 2026, through a dual-class structure that gives his Class B shares twenty votes each [22]. At the IPO he held 24.9% of shares and 63.7% of the vote [23]; the years of buybacks, which retired Class A shares and left his Class B holding intact, have tightened his control rather than loosened it.

For an investor who prizes owner-operators, the alignment is genuine — the founder's economic stake dwarfs any outside holder's. The same structure, though, means minority holders cannot force a sale, a board change or a capital-return policy; on any contested question, Mr. Huang decides. That is a feature for a reader who trusts the operator and a risk for one who does not, and it is why the questions of what management is paid and how it has spent capital sit near the center of this case.

The through-line

The question this report exists to answer is whether Yatsen's post-crash stabilization — re-accelerating, skincare-led revenue and near-eliminated operating losses, sitting on net cash and no debt under a controlling founder — is the start of durable, self-funding profitability worth more than the cash on its books, or a still-cash-burning turnaround that is returning its IPO windfall to shareholders faster than the business is earning it. The chapters that follow test the two halves of that question in turn: the quality and durability of the operating recovery, and the margin of safety the balance sheet and the founder actually provide.

Sources: market capitalization derived from ADS price (company filings and market data, as reported) and shares outstanding; net cash and buybacks from FY2025 20-F [24] [25]; founder voting power from FY2025 20-F [26].