Chapter 8

Investment Portfolio

Beyond its net cash, Yatsen carries ¥653.6 million (US$93.5 million, roughly 29% of market cap) of long-term investments — the least-examined leg of its asset floor. Opened up, it is sounder than its opacity implies: ¥581.1 million, or 89%, is equity-method stakes in five private companies that together earned ¥140.0 million in 2025 and paid Yatsen its first cash dividends [1] [2]. The offset is location: none of it sits offshore, and 56% is held inside the variable-interest entity [3].

The valuation floor and the China structure both counted this ¥653.6 million but left it as one line. This chapter opens it — what the money is invested in, whether the assets are earning, and how reachable they are from a New York-listed share.

What the ¥653.6 million is

The investment note splits into three unequal legs. Equity-method stakes in five private entities dominate at ¥581.1 million. A second ¥72.5 million sits in two more private companies held at cost because they have no readily determinable fair value. The third leg — available-for-sale debt of two private issuers — was written to zero in 2025 [4].

Source: FY2025 Annual Report (Form 20-F), Note 8 Investments and Consolidated Balance Sheet [5] [6]; market cap at $3.43 on 28 Jul 2026.

Source: FY2025 Annual Report (Form 20-F), Note 8 Investments [7].

The book has stopped growing and started returning cash. Yatsen put ¥121.5 million into equity investments in 2023 and ¥42.0 million in 2024, then nothing in 2025 [8]. Over the same span the carrying value of the equity-method leg barely moved — ¥532.3 million (2023), ¥576.9 million (2024), ¥581.1 million (2025) — as retained earnings and the first distributions roughly offset [9] [10].

Source: FY2024 and FY2025 Annual Reports (Form 20-F), Note 8 Investments [11] [12].

The biggest leg is backed by profitable businesses

The equity-method stakes are the part of the book with real disclosure behind it. Because they met the significance test in Rule 4-08(g) of Regulation S-X, the filing carries combined financial statements for all five investees. Together they held ¥3.30 billion of net assets at the end of 2025 and turned ¥597.2 million of revenue into ¥140.0 million of net income — a 23.4% net margin, and the third straight year of nine-figure profit [13].

Source: FY2025 Annual Report (Form 20-F), Note 8 Investments — Rule 4-08(g) combined financial information [14].

Two facts matter more than the profit itself. First, in 2025 the portfolio returned cash for the first time: Yatsen collected ¥11.1 million of dividends from these investees, having received none in 2023 or 2024 [15]. That is the first hard evidence the carrying value converts to something other than an accounting entry. Second, the dividend exceeded the ¥5.9 million Yatsen booked as its share of the investees' earnings that year [16].

That ¥5.9 million recognized share is the important qualifier on all of the above. Set against the investees' combined ¥140.0 million of net income, it says Yatsen's economic interest in the profitable pool is a modest slice, not a near-controlling one — so the combined statements establish that the underlying businesses are real, earning, and asset-rich, but they cannot be used to value Yatsen's specific stakes, and they neither confirm nor refute that ¥581.1 million is the right mark. The combined balance sheet is also asset-heavy for its revenue — ¥3.07 billion of non-current assets against ¥597.2 million of sales — consistent with at least one investee being itself an investment-holding vehicle rather than a pure operating company [17].

The soft edges

The two smaller legs are where the disclosure thins and the impairments land. The ¥72.5 million of cost-basis stakes carry no observable price and no earnings disclosure; they are marked at cost unless an impairment or an observable transaction forces a change. The available-for-sale debt leg shows how that mechanism plays out: convertible notes and preferred shares of two private issuers, carried around ¥13.4 million for years, were fully impaired in 2025 — a ¥13.5 million charge that took the balance to nil [18] [19].

The write-down is small against the ¥653.6 million total, but it is the tell: management does mark these private positions down when the evidence turns, and both the debt leg and the cost-basis leg sit in Level 3 of the fair-value hierarchy, valued on unobservable inputs [20]. The 11% of the book outside the equity-method stakes is the part a buyer would haircut first.

Where the assets sit

The quality of the biggest leg runs into the same wall as the rest of Yatsen's balance sheet: geography. The consolidating schedule places the entire ¥653.6 million onshore in China. Not one renminbi is held at the Cayman parent that sits above the listed shares. ¥365.7 million — 56% — is held inside the VIE and its subsidiaries, with ¥183.7 million in the primary-beneficiary WFOE and ¥104.1 million in other onshore subsidiaries [21].

Source: FY2025 Annual Report (Form 20-F), condensed consolidating schedule [22].

This is the same repatriation friction the China structure chapter traced for the cash: getting value from these investments to an offshore shareholder means routing distributions up through the WFOE and out of China, against the renminbi's limited convertibility. The portfolio adds its own tax drag — the deferred tax liability booked on the equity-method investees' undistributed earnings rose to ¥19.2 million in 2025 from ¥10.6 million a year earlier, the tax that would attach as those earnings are pulled out [23]. The ¥11.1 million dividend shows the channel works; the geography sets what a conservative mark should be.

The read

For an investor sizing the asset floor, the investment book is a modest positive that comes with a discount. The evidence for the positive is specific: the 89% of the portfolio that matters is staked in businesses earning a 23% net margin on ¥3.3 billion of net assets, and 2025 was the first year those stakes paid cash back. That is a better answer than "unmarked private holdings" to the question of what backs the ¥653.6 million. The strongest fact against reading it at par is also specific: Yatsen's recognized share of the investees' profit is only ¥5.9 million, the two smaller legs are Level 3 marks that management has already begun writing down, and every asset sits onshore with 56% inside the VIE — so in any liquidation-style net-asset view the book belongs at a discount to carrying value, not at face. What would move the mark either way is disclosure the filings do not yet give: the identity and size of the individual stakes, a further impairment, or a realization event — a stake sale or a larger distribution — that prices even one of them at arm's length.