TSMC(US:TSM)2024-10-23 02:14Investment Rating - The report maintains a "Buy" rating for TSMC (2330.TT) and TSM (TSM.US) with target prices of NT$1,273.5 and US$228.8 respectively, indicating potential upside of 17% and 13% [5][14]. Core Insights - TSMC's third-quarter gross margin exceeded market expectations, driven by strong AI demand, which is expected to boost gross margins further in the fourth quarter [5][6]. - The company has raised its revenue growth guidance for the year to nearly 30% and increased its capital expenditure forecast to slightly above US$32 billion, indicating it is still in an upward semiconductor cycle [6]. - TSMC's sales revenue for Q3 was NT$759.69 billion, a 39% year-on-year increase and a 13% quarter-on-quarter increase, surpassing market consensus [10]. - The gross margin for Q3 was 57.8%, up 3.6 percentage points year-on-year and 4.7 percentage points quarter-on-quarter, significantly above market expectations [10]. Financial Performance Summary - Revenue and Growth: TSMC's revenue for 2023 is projected at NT$2,161.736 million, with a year-on-year decline of 5%. However, revenue is expected to rebound with a growth of 33% in 2024 and 28% in 2025 [7]. - Profitability Metrics: The gross margin is expected to improve to 55.8% in 2024 and 57.8% in 2025, with net profit projected to grow by 36% in 2024 and 33% in 2025 [7][13]. - Earnings Per Share: Basic earnings per share are forecasted to be NT$44.6 in 2024 and NT$59.3 in 2025, reflecting a strong recovery [7][13]. Earnings Guidance - For Q4, TSMC expects revenue to reach NT$848 billion, a 36% year-on-year increase and a 12% quarter-on-quarter increase, driven by sustained AI-related demand [10][12]. - The gross margin guidance for Q4 is set at 58.0%, indicating a 5.0 percentage point year-on-year increase [10][12]. Valuation - The report employs an EV/EBITDA valuation method, assigning TSMC a target EV/EBITDA of 16.5x under a base case scenario for 2024, leading to a target price of NT$1,273.5 [14][15]. - The valuation reflects a premium over TSMC's historical averages, suggesting a favorable investment outlook [14][15].