Daiwa Securities ups target price on TSMC shares


TAIPEI–Daiwa Securities said Friday that it has raised its target price on shares of Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電), the most heavily weighted stock in the local market, amid optimism over its earnings prospects.

In a research note, Daiwa Securities said its target price on TSMC shares has been raised to NT$140 (US$4.73) from NT$128, while an “outperform” recommendation on the stock remains unchanged.

Shares of TSMC bucked the downturn on the broader market that day, closing up 0.80 percent at NT$125.50. The weighted index on the Taiwan Stock Exchange ended down 0.15 percent at 9,306.83 points.

Daiwa Securities said that on the back of strong demand from its major clients, production capacity of TSMC’s 12-inch wafer plants are expected to be 97 percent utilized in the second half of this year, up from 95 percent recorded in the first half. Currently, TSMC runs three 12-inch wafer plants in Taiwan.

According to Daiwa Securities, TSMC’s major clients include consumer electronics giant Apple Inc., logic IC suppliers Xilinx Inc. and Altera Corp., as well as smartphone chip designers Qualcomm Inc. and MediaTek Inc.

Daiwa Securities has forecast that the world’s largest contract chip maker will post NT$9.07 in earnings per share (EPS) for 2014. In 2013, TSMC’s EPS hit a record high of NT$7.26.

The brokerage said that as demand for chips made on TSMC’s advanced 28 nanometer and 20nm processes remains strong, the chip’s average selling price could rise 6 percent in 2014 from a year earlier and its gross margin is likely to rise to 47.8 percent from 47.1 percent.

Chips made on the 28 nm and 20 nm process are expected to account for about 55 percent of TSMC’s total sales in the fourth quarter of this year, while the 20 nm technology could make up 20 percent of the total, Daiwa Securities said.

In the first quarter, the 28 nm process made up 34 percent of TSMC’s total revenue, up from 32 percent recorded in the previous quarter.

TSMC launched mass production of chips on the 20 nm process in January and is scheduled to kick off commercial production of chips on the even more sophisticated 16 nm process early next year.