Revenue grew steadily, and gross margin improved markedly. Driven by growth in major overseas customers, household savings, and automobile businesses, 1Q23 revenue increased 26% year-on-year to 26.37 billion yuan. 1Q23 gross profit increased 77% year on year to 2.03 billion yuan. Gross margin recorded 7.7%, up 2.2 pct year on year and 1.5 pct over month. Mainly due to factors such as product structure and customer structure optimization, scale increase, and improved capacity utilization. Guimu's net profit recorded 4.6 billion yuan, an increase of 154.9% over the previous year. Guimu's net profit margin was 1.7%, an increase of 0.9 pct over the previous year. The increase in the company's gross margin was slightly higher than expected, and the increase in net profit was basically in line with expectations. The higher cost item than expected was mainly due to the large investment in automobile-related R&D. We determined that as the business structure continues to improve and capacity utilization increases, there is still room for improvement in the company's profitability.
Consumer electronics: The Android market continues to be sluggish, with overseas customers driving growth. According to IDC, 1Q23 global mobile phone shipments reached 270 million units, down -14.6% year on year. Among them, Apple phone shipments fell 2.3% year on year, Android phone shipments fell 17.3% year on year; global PC market shipments fell 29%, of which Apple PC shipments fell 40.5% year on year. Despite the sluggish market situation, the company's consumer electronics sector continued to grow, driven by major overseas customers, which was basically in line with expectations. We expect the company's share of major overseas customers to increase further in 2023, which will drive revenue growth and gross margin in the consumer electronics sector.
New energy vehicle products: The sector's revenue has doubled, and it continues to be optimistic. Since 2023, more and more products in the company's automotive sector have contributed to revenue. In addition to cockpit products in a broad sense, intelligent driving has continued to grow since mass production in the second half of 2022, and thermal management and suspension products will also contribute revenue one after another. We expect that along with the growth of the parent company, the company's new energy vehicle products are expected to maintain rapid growth in 2023 while improving the company's overall gross margin level.
New smart products: Household savings are growing rapidly, and other products are growing steadily. The transition to new energy sources is the general trend. The company's household storage products have strong brand power in Europe. The 1Q23 revenue growth rate was fast. It is expected that growth will nearly double this year. Other smart products such as games, smart homes, sweeping robots, and drones are growing steadily.
Investment advice: We forecast the company's revenue for 2023-2025 to be 1308/1554/179.2 billion yuan, a year-on-year growth rate of 22.1%/18.7%/15.3%; the net profit of the mother is 26.5/43.5/5.64 billion yuan, an increase of 42.2%/63.9%/29.7% over the previous year. Considering the high growth of the company's emerging business, we believe that the company's reasonable market value is HK$72.4 billion (HK$32 per share, based on the HKD/RMB exchange rate on May 8), corresponding to 24x 2023e P/E, maintaining a “buy” rating.
Risk warning: The recovery rate of the mobile phone market falls short of expected risks, the growth rate of emerging businesses falls short of the expected risk, the improvement in capacity utilization falls short of the expected risk, major North American customers and Android orders fall short of the expected risk, the risk of increased competition in the industry, and investment in new business increases the risk of dragging down profits.