Yatsen – Quick Cal.

Comments on data in F-1:

Yatsen has been growing very fast and the revenue contribution is getting more balanced or diversified in terms of channel, brand and product as the company launches and acquires more brands. It seems the company is quite aggressive on acquisition so the future growth will be relatively difficult to project.

While the company boasts itself as a DTC company, the level of data transparency makes us analyze it like a traditional consumer product company. One of the primary advantage that DTC company enjoys is that it owns customer relationship. The company understands customer behavior thanks to data collected in each scene along the transaction journey.

With those data, I believe Yatsen can properly conduct unit economics analysis and cohort analysis on its customer base. However, since Yatsen only releases limited information, outsiders need to do some detective works to figure that out. I expect Yatsen to experience hypergrowth going forward for several quarters so doing that analysis adds little value at the moment.

Just some comments on the disclosed data:

Average net revenue per DTC customer increases over time indicating overall improvement in customer behavior. Average net revenue per shipment is relatively stable indicating average order value doesn’t change much while repeat purchase rate and purchasing frequency might increase ( because average net revenue per customer is increasing).

The way Yatsen shows its cohort data makes me feel it’s reluctant to discuss churn and some unit economics metrics such as customer lifetime value and customer acquisition cost. I’m not familiar with customer behavior in beauty product so I can’t tell whether a roughly three quarters repeat purchase rate between 30% and 40% is good or not. I can check comps but the expected growth will make metrics less comparable.

I would expect the company to spend aggressively to acquire/retain customers, to acquire new brands, to build capacity (net working capital and PP&E) and maybe to do more R&D. Growth consumes capital but generates optionality if executed well.

Some historical financials and my guesses below. You can tell from the calculation I only care about topline growth. It will be free cash flow negative and loss making for a while. If there’s fierce competition or poor execution, it will show up in the inventory turnover days, gross margin and obviously uncontrollable S&M expenses.

I use FY21 EV/Sales and FY21 P/Sales. One of 2021 sales forecasts from broker is RMB10,700M.


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