Core Viewpoint - Yatsen Holding, the parent company of the cosmetics brand Perfect Diary, reported a significant revenue increase in Q3 2025, marking a turnaround after a prolonged decline, driven primarily by its skincare brands rather than its traditional makeup business [1][4]. Financial Performance - In Q3 2025, total net revenues reached 998.4 million RMB (approximately 140.2 million USD), a 47% increase from 677.0 million RMB in the same period last year [2][5]. - Gross profit for the same quarter was 780.5 million RMB, reflecting a 51.9% year-over-year increase, with gross margin improving from 75.9% to 78.2% [5]. - The company reported a net loss of 70.4 million RMB, a 41.9% reduction compared to the previous year, with a non-GAAP net loss of 51.5 million RMB, down 32.8% [9]. Business Transformation - Yatsen's new growth engine is its skincare brands, which generated 490.8 million RMB (approximately 68.9 million USD) in revenue, an 83.2% increase year-over-year, accounting for 49.2% of total net revenues [3][4]. - The company has shifted focus from its declining makeup business, which saw a 57.7% drop in revenue in 2022, to a diversified portfolio that includes skincare brands like Colorkey, EVE LOM, and DR. WU [7][8]. Market Positioning - The company aims to enhance its market position by transitioning from a budget-focused brand to a high-end skincare provider, with a clear strategy to increase the proportion of skincare products in its offerings [10][11]. - Colorkey, a high-end skincare brand, has shown strong market performance, indicating a successful shift in consumer purchasing trends towards premium products [11]. Future Outlook - Yatsen Holding remains optimistic about future growth, projecting Q4 2025 total net revenues between 1.32 billion and 1.49 billion RMB, representing a year-over-year increase of approximately 15% to 30% [13].

Investment Rating - The report assigns an "Outperform" rating to multiple companies including Nike, Midea Group, JD Group, Haier Smart Home, Gree Electric Appliances, Anta Sports, and others, while Lulu Lemon is rated as "Neutral" [1]. Core Insights - The report highlights that various sectors within the discretionary industry are experiencing continuous rotation, with price pullbacks presenting buying opportunities [4][11]. - The performance of different sectors is analyzed, with jewelry, overseas cosmetics, luxury goods, and snacks showing positive growth, while domestic cosmetics and gaming sectors are underperforming [6][13]. Sector Performance Overview - Weekly performance shows jewelry leading with a 9.9% increase, followed by overseas cosmetics at 6.8%, and luxury goods at 5.5%. Domestic cosmetics experienced a slight decline of 0.3% [11][12]. - Year-to-date performance indicates jewelry has risen by 179.1%, domestic cosmetics by 50.4%, and overseas cosmetics by 42.3%, while overseas sportswear has declined by 17.7% [11][12]. Valuation Analysis - Most sectors are currently valued below their average over the past five years, with the expected PE for overseas sportswear at 31.9 times, domestic sportswear at 13.4 times, and jewelry at 27.2 times, indicating potential for growth [9][14]. - The report notes that the expected PE for various sectors in 2025 is lower than their historical averages, suggesting that there may be undervalued opportunities in the market [14].

Core Viewpoint - Yatsen Holding Limited reported a 7.8% year-over-year increase in total net revenues for Q1 2025, driven by significant growth in skincare brands despite a challenging beauty market [3][4][6]. Financial Performance - Total net revenues for Q1 2025 reached RMB 833.5 million (US$ 114.9 million), up from RMB 773.4 million in the same period last year [4][6]. - Skincare brands contributed RMB 362.4 million (US$ 49.9 million) in net revenues, marking a 47.7% increase year-over-year [6]. - Gross profit increased by 9.7% to RMB 659.1 million (US$ 90.8 million), with gross margin rising to 79.1% from 77.7% [4][6]. Operating Expenses - Total operating expenses decreased by 8.6% to RMB 693.2 million (US$ 95.5 million) compared to the prior year [5][7]. - Selling and marketing expenses were RMB 553.8 million (US$ 76.3 million), with a decrease in percentage of total net revenues to 66.4% from 69.7% [7]. - General and administrative expenses dropped to RMB 64.9 million (US$ 8.9 million), representing 7.8% of total net revenues, down from 18.1% [7][8]. Loss and Income Metrics - The company recorded a net loss of RMB 5.6 million (US$ 0.8 million), significantly reduced from RMB 124.9 million a year ago [6][11]. - Non-GAAP net income for Q1 2025 was RMB 7.1 million (US$ 1.0 million), compared to a non-GAAP net loss of RMB 83.8 million in the previous year [12][36]. Cash Flow and Balance Sheet - As of March 31, 2025, Yatsen had cash and short-term investments totaling RMB 1.28 billion (US$ 176.4 million) [13]. - Net cash generated from operating activities was RMB 23.8 million (US$ 3.3 million), a turnaround from net cash used in operating activities of RMB 121.8 million in the prior year [13]. Business Outlook - For Q2 2025, Yatsen expects total net revenues to be between RMB 810.4 million and RMB 889.9 million, indicating a year-over-year increase of approximately 2% to 12% [14]. Share Repurchase Program - The company has initiated a new share repurchase program allowing for the repurchase of up to US$ 30.0 million worth of ordinary shares over the next 24 months [15][16].