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CDI - Christian Dior SE News Story

€591 14.0  2.4%

Last Trade - 16/04/21

Sector
Consumer Cyclicals
Size
Large Cap
Market Cap £92.38bn
Enterprise Value £138.05bn
Revenue £38.69bn
Position in Universe 9th / 847

BREAKINGVIEWS-Look past Chinese makeup IPO’s glossy sheen

Mon 9th November, 2020 3:44am
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.) By Sharon Lam HONG KONG, Nov 9 (Reuters Breakingviews) - The beauty of a Chinese makeup company’s initial public offering is to some extent skin deep. Yatsen wants to raise fresh capital to build on the fast success of its Perfect Diary products. Comparable sales multiples imply a chunky valuation, but that’s before applying a fad discount. The unprofitable company exploded onto the scene in just four years. It grabbed 4% of China’s market for facial cosmetics, lip and nail products, according to research outfit Euromonitor. That puts it up against Estee Lauder’s EL.N MAC, and right on the heels of L’Oreal OREP.PA and Christian Dior DIOR.PA . A bias toward homegrown products helps. Some 85% of Chinese respondents said they would buy a local brand over a foreign one, up from 15% in 2011, according to a Fidelity International survey from July. Another part of the success under founder Jinfeng Huang, who controls the company with super-voting shares, has been tech nous. Yatsen leans on some 15,000 social-media influencers. Live-streaming sales maestro Li Jiaqi, also known as “lipstick king”, is a big help targeting young shoppers. The financial results are starting to lose some sparkle, however. Although Yatsen’s top line surged by 377% last year from 2018, the rate slowed to 73% in the first nine months of 2020. The pandemic and a jumbo-sized marketing budget also helped widen the net loss attributable to ordinary shareholders to $352 million in the nine months ended September. If Yatsen sustains the same revenue growth over the next year, it would generate nearly $1.1 billion. Domestic and overseas peers such as Proya Cosmetics 603605.SS and Estee Lauder trade on average at just over 6 times expected sales. Coty COTY.N valued Kylie Jenner’s company similarly when it bought a 51% stake last November. On that multiple, Yatsen would be worth $7 billion. That sounds generous at this stage. Although Yatsen blamed Covid-19 for its slower growth, there are also signs of brand fatigue. Net revenue at Perfect Diary, which accounts for 80% of the company’s total, increased just 40% year-on-year in the nine months to September. That may explain Yatsen’s desire for acquisitions and more tech investment, but there isn’t enough evidence yet to suggest Huang can sustain the short-lived success. On Twitter https://twitter.com/sharonlamhk CONTEXT NEWS - Yatsen, a Chinese cosmetics and skincare maker, submitted documents to U.S. regulators on Oct. 30 for an initial public offering. - The company – whose brands include Perfect Diary, Little Ondine and Abby’s Choice – intends to use the proceeds for, among other things, potential acquisitions, development of data analysis technology and opening new stores. - Goldman Sachs, Morgan Stanley, China International Capital Corporation and Tiger Brokers are the underwriters. - Yatsen’s net loss attributable to ordinary shareholders widened to about 2.4 billion yuan ($352 million) in the nine months ended Sept. 30 from about 64 million yuan in the same period a year earlier. - For previous columns by the author, Reuters customers can click on LAM/ - SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: http://bit.ly/BVsubscribe <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Link to prospectus https://www.sec.gov/Archives/edgar/data/1819580/000119312520282237/d57580df1.htm Reuters: 'All girls, buy it!' In China, Perfect Diary gives cosmetics world a makeover with live streams, low prices urn:newsml:reuters.com:*:nL2N2EY0AF BREAKINGVIEWS - Italian Insta-star IPO to test influencer model urn:newsml:reuters.com:*:nL8N2H31OJ BREAKINGVIEWS - Make-up artist’s star power tested by $1 bln tag urn:newsml:reuters.com:*:nL8N2DH2DH ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Jeffrey Goldfarb and Katrina Hamlin) ((sharon.lam@thomsonreuters.com; Reuters Messaging: sharon.lam.thomsonreuters.com@reuters.net))
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