Prospects lift TSMC’s share price 6.61%

WIN-WIN SITUATION::Taiwan Semiconductor Manufacturing Co’s soaring stock price lifted the TAIEX 1.79 percent to 7,930.8, while its local rival UMC’s shares also jumped

By Lisa Wang  /  Staff Reporter

Sat, Apr 20, 2013 - Page 1

Shares of the world’s top contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), yesterday rallied close to the 7 percent daily limit, boosted by strong second-quarter prospects that greatly exceeded the expectations of most analysts.

TSMC’s stock price surged 6.61 percent, or NT$6.6, to NT$106.5, hitting its highest level since Feb. 23.

Overseas fund managers bought 17.02 million TSMC shares yesterday, reversing a net sale of 4.65 million shares in the previous trading day.

That pushed up TSMC’s market value to NT$2.7 trillion (US$90.48 billion), representing more than 12 percent of the local stock maker’s total value of NT$22.19 trillion.

Boosted by the strong performance of TSMC, the TAIEX jumped 1.79 percent to 7,930.8, ending the week 1.4 percent higher.

The overall positive momentum also drove up the stock price of TSMC’s local rival United Microelectronics Corp (UMC, 聯電), which rose 2.25 percent.

Shares of TSMC’s chip testing and packaging services partner Advanced Semiconductor Engineering Inc (ASE, 日月光) and its equipment supplier Hermes Microvision Inc (漢微科) soared 3.39 percent and 5.15 percent respectively to NT$25.95 and NT$776.

“TSMC reported another leg-up on sales with guidance for mid-teens growth, above most market expectations for mid-high single digits,” Credit Suisse analyst Randy Abrams said in a report released yesterday.

TSMC told investors on Thursday that revenue would grow between 16 percent and 17.5 percent to range from NT$154 billion to NT$156 billion in the second quarter, from the first quarter’s NT$132.76 billion, on robust demand from chips used in mobile devices in emerging markets — China in particular.

“We still see solid and steady earnings growth supporting the outlook for the company,” Abrams said in the report.

Credit Suisse increased TSMC’s target price to NT$116 from NT$109 and raised its net profit forecast for the company to NT$186.58 billion this year, from its previous estimate of NT$181.5 billion. The brokerage also increased TSMC’s net profit forecast next year to NT$ 213.94 billion, from an earlier estimate of NT$212.63 billion.

Abrams reiterated his “outperform” rating on TSMC.

TSMC chairman and CEO Morris Chang (張忠謀) said on Thursday that the company stood by its target of reaching a compound annual growth rate of 10 percent in pre-tax profits over the period from last year to 2017.

This year, revenue would grow much faster than the growth rate of 10 percent annually that he forecast for contract chipmakers as a whole, Chang said.

Daiwa Capital Markets analyst Eric Chen (陳慧明) said that strong second-quarter guidance would help support TSMC’s share price in the short term, but he was still concerned about potential inventory buildup in the second half of the year.

“We do not suggest to get in for a long-term investment without [having a] clear visibility of the 20-nanometer [nm] business … and [limited revenue contribution from] Apple Inc’s application processor business in 2013,” Chen said.

Chen expected TSMC to receive orders from Apple in the final quarter of this year. TSMC said that 20nm chips would start to contribute revenue in the second quarter of next year.