Daiwa Securities said yesterday 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 from NT$128, while an “outperform” recommendation on the stock remains unchanged.
Shares of TSMC bucked the downtrend on the broader market, closing up 0.8 percent at NT$125.5.
The weighted TAIEX 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 is expected to be utilized at 97 percent in the second half of this year, up from the 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 would post NT$9.07 in earnings per share (EPS) this year. Last year, 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 (nm) and 20nm processes remains strong, the chips’ average selling price could rise 6 percent this year from a year earlier and the gross margin is likely to rise to 47.8 percent from 47.1 percent.
Chips made on the 28nm and 20nm process are expected to account for about 55 percent of TSMC’s total sales in the fourth quarter of this year, while the 20nm technology could make up 20 percent of the total, Daiwa Securities said.
In the first quarter, the 28nm 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 20nm process in January and is scheduled to begin commercial production of chips on the more sophisticated 16nm process early next year.
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