Morgan Stanley said on Saturday it has maintained an “overweight” rating on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, after its better-than--expected first quarter results.
Morgan Stanley has meanwhile left unchanged a target price of NT$85 on TSMC shares.
In a research note, the brokerage said chips used in communications products accounted for 48 percent of TSMC’s total sales for the first quarter of this year, a record high for the company as a result of the booming global smartphone market.
In the first quarter, TSMC posted NT$36.28 billion (US$1.26 billion) in net profit, down 10.9 percent from the previous quarter, on sales of NT$105.38 billion, which were down 4.3 percent quarter-on-quarter.
The first quarter is traditionally a slow season for the global foundry industry.
TSMC said at an investor conference held on Thursday that it had left unchanged its estimate that sales for this year will rise 20 percent from last year in US dollar terms, while it cut a forecast of growth in the global semiconductor industry from 7 percent to 4 percent.
In addition, TSMC said it also expected its sales for the second quarter to rise between 3.4 percent and 5.3 percent from the first quarter to a range between NT$109 billion and NT$111 billion.
For the second quarter, TSMC said it’s gross margin is expected to be 46.5 percent, down from the 49 percent recorded in the first quarter.
Morgan Stanley said the estimate is still within market expectations. It said TSMC’s -better-than-expected first quarter earnings reflected the company’s success in maintaining its gross margin and controlling operating expenses.
“Our thesis for investors is to take a more cautious stance on the foundry sector overall, but to overweigh TSMC on its significant exposure to smartphones and tablets,” Morgan Stanley said.
“The fact is TSMC is outperforming peers and communications is outpacing other sectors to give us more confidence in the thesis,” the brokerage said.
Morgan Stanley said TSMC’s earnings per share for this year, next year and 2013 would rise to NT$6.39, NT$6.63 and NT$7.15 respectively, from last year’s NT$6.23.
On Friday, shares in TSMC fell 0.27 percent to NT$73.2 on the -Taiwan Stock Exchange.