TSMC(US:TSM) First Shanghai Securities·2024-07-05 05:31Investment Rating - The report initiates coverage with a "Buy" rating for TSMC, setting a target price of $245.00, indicating a potential upside of 34.25% from the current price of $182.49 [1][4]. Core Insights - TSMC is expected to benefit from a simultaneous increase in volume and price due to the demand for AI computing chips and the upcoming product launches from major clients like Apple and Qualcomm [1]. - The advanced packaging capacity is projected to double over the next two years, driven by the increasing demand for higher performance chips [1]. - The foundry industry is experiencing a significant concentration of orders towards leading companies, with TSMC holding over 60% market share due to its superior yield and advanced process technology [1]. Summary by Sections Financial Summary - Total revenue for 2023 is reported at NT$2,161,736 million, with a forecasted increase to NT$2,859,312 million in 2024, representing a 32.3% growth [2]. - Net profit for 2023 is NT$837,768 million, expected to rise to NT$1,108,724 million in 2024, marking a 32.3% increase [2]. - Earnings per share (EPS) is projected to grow from NT$32.3 in 2023 to NT$43.4 in 2024, reflecting a 34.4% increase [2]. Company Overview - TSMC, founded in 1987, pioneered the foundry model and currently holds over 60% of the market share in the semiconductor industry [5][29]. - The company operates multiple fabs and focuses on advanced process technologies ranging from 3nm to 3um [5]. Business Segments - TSMC's advanced process technology contributes significantly to its revenue, with 67% of revenue coming from 7nm and below processes in the fiscal year 2023 [9]. - The company also provides mature process technologies for IoT, automotive, and consumer electronics, with a declining revenue contribution from 67% in 2020 to 33% in 2023 [9]. Competitive Advantages - TSMC's foundry model allows it to focus on chip manufacturing while its clients, primarily fabless companies, can concentrate on design [29]. - The company has established deep relationships with major clients like Apple and NVIDIA, which contribute significantly to its revenue [32]. Future Outlook - The demand for AI computing chips is expected to drive TSMC's growth, with advanced process and packaging technologies playing a crucial role in meeting this demand [1]. - TSMC's capital expenditures are projected to remain high, with a forecast of $32 billion for 2024, indicating strong growth prospects [35].