UNIFON’s Parent Company Fails to Maintain Profit in H1 of 2022
- Chaileedo Press
- Aug 15, 2022
- 4 min read
Updated: Aug 25, 2022
Abstract: The parent company of UNIFON, S'Young, released its 2022 semi-annual report. in the first half of 2022, S'Young achieved operating revenue of about 2.201 billion yuan, up 3.89% year-on-year; Its lotion category revenue increased 50.23% year-on-year.
According to CHAILEEDO, S'Young was formerly known as Yu Jia Hui. In 2006, the main brand UNIFON was born, based on which Yu Jia Hui was established in 2012. In 2015, Yu Jia Hui began to operate as an agent of international brands' online business. Its first agent brand is the Korean mask brand Leaders. Then the company added Japanese Dr. Ci:Labo, Italian fashion makeup KIKO and other agent businesses. In 2018, S'Young was listed on the stock exchange. At present, the group has brands such as UNIFON, Mihoo, and HPH. However, the company's performance did not soar in the first two years after its going list.
CHAILEEDO has found that the company's revenue increased from $243.9 million (in 2017) before the IPO to $742.5 million in 2021, a twofold increase in five years after analyzing its financial report of S'Young. In particular, 2020 saw a dramatic increase in net profit of 417.58%, a change from the previous two years. And it also still maintained a 70% increase in net profit last year. However, S'Young has been in a situation of increasing revenue but not profit. In 2018, S'Young's total revenue rose 36.42% and net profit attributable to shareholders of the listed company fell 17.51%. In 2019, total revenue rose 7.60% and net profit attributable to shareholders of the listed company fell 79.97%.
In 2020 and 2021, the situation improved due to the steady expansion of its own brands plus agency brands and the booming market of China's cosmetics industry with total revenue up 54.11% and net profit attributable to shareholders of the listed company up 417.58% in 2020. In 2021, its total revenue soared by 26.37% and net profit attributable to shareholders of the listed company increased by 18.18% in 2021. However, in 2022, S'Young returned to the formal situation that increased revenue, not profit, according to the S'Young released in the latest 2022 first half financial report. Its operating income rose 3.89% and net profit attributable to shareholders of the listed company fell 6.88%.
For this year's profit decline, the S'Young explained that, during the reporting period, by the repeated impact of COVID-19 in China and worldwide and some regional supply chain and logistics restrictions, the company's own brand and agent brand business development have had a certain degree of adverse impact. In addition, in the first half of this year, the company's own brand focused on upgrading the new, resulting in brand positioning, design and other costs increased. A large number of launching new products led to a sharp increase in research and development costs, so the company's profits were affected.
Prior to this, the investment in R&D of S'Young was on a declining trend. Data show that from 2018 to 2021, the R&D expense ratio of S'Young was 2.05%, 1.82%, 1.28%, and 1.32%. However, in the first half of 2022, the R&D expense ratio of S'Young shares rose back to 1.95%. In early August this year, the S'Young disclosed to the public that its continued investment of up to $207 million S'Young Smart Base has been launched into production. The base is a collection of research and development, design, production, logistics, and so on. Its annual output value is expected to be nearly $591 million.
As a beauty group, the mask was once the most important sales category for S'Young. Its reliance on the patch mask category gradually decreased as the company gradually expanded into multiple categories such as lotion, cream, color cosmetics, and personal care. From 2018 to 2021, the revenue share of the patch mask category was 55.19%, 37.31%, 25.56%, and 17.87%. In the first half of 2022, this proportion decreases to 13.4%.
Correspondingly, the revenue share of the category of lotion, cream, and non-patch mask has increased from 37.46% and 5.45% in 2018 to 74.56% and 35.42% in the first half of 2022, respectively. At the same time, the revenue growth rate of the lotion category is also faster than the patch mask. The data show that in the first half of 2022, the patch mask of S'Young revenue decreased by 28.69% year-on-year while lotion category revenue increased by 50.23% year-on-year. Some analysts said that the decrease in revenue of the patch mask category may be due to the intensification of competition in the beauty industry and the weakening of the traffic dividend of e-commerce platforms.
To make up for the company's shortcomings in the independent high-end brands, in July this year, S'Young acquired the French high-luxury anti-aging brand EviDenS de Beauté. It completed the investment in the French light luxury brand PierAuge and the acquisition of its Chinese business. Among them, EviDenS de Beauté, which was acquired for $45.5 million, was its exclusive partner when it entered China in 2019. Its sales in China grew by more than 700% in 2020. S'Young shares also said in the investor relations activity record form that EviDenS de Beauté can work hard to maintain a reasonable profit structure while EviDenS de Beauté can actually maintain a better profit structure and is expected to have better contribution expectations next year.
Minsheng Securities, one of the earliest established securities companies in China, analyzed that the acquisition of EviDenS de Beauté, which enjoys more profitability, will fill the gap in the company's high-end market. It is expected to increase the company's profits while also empowering the company with high-end offline channels.
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