United Integrated Services Co (UIS, 漢唐集成), which provides electric system integration engineering services, is part of a supply chain that is set to benefit from Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) multiyear capacity expansion plans, despite weak sales and earnings growth so far this year, Yuanta Securities Investment Consulting Co (元大投顧) said on Friday.
Revenue in the first four months of this year declined 21.94 percent to NT$7.72 billion (US$278.49 million), from NT$9.89 billion a year earlier, UIS data showed.
Net profit in the first quarter was almost flat from last year, rising 0.15 percent to NT$746.88 million. That translated into earnings per share of NT$3.92.
Photo: Grace Hung, Taipei Times
“We remain positive on UIS given it has 70 percent to 80 percent order allocation from TSMC for clean room electrical and mechanical engineering services, and is thus a major beneficiary of its capacity expansion,” Yuanta analysts wrote in a research note.
UIS helps TSMC build manufacturing facilities, including the chipmaker’s advanced Fab 14, which produces 5-nanometer chips, and Fab 18, which is to begin volume production of 3-nanometer chips in the second half of next year.
In early April, TSMC announced that it would invest about US$100 billion to expand capacity and fund research and development over the next three years, in response to a lack of capacity in the supply chain and rising demand caused by the 5G and high-performance computing trends.
The chipmaker is planning several capacity expansion projects, including the P4 to P6 plants at Fab 18 and the P8 plant at Fab 14 in Tainan, the research and development center in Hsinchu County’s Baoshan Township (寶山) and a packaging plant in Miaoli County’s Jhunan Township (竹南), as well as a new plant at its Nanjing fab in China and the new Arizona fab in the US, Yuanta analysts said.
Apart from orders from TSMC’s new projects, Yuanta analysts said that UIS in the near term would benefit from capacity expansion at US-based DRAM chipmaker Micron Technology Inc’s fab in Taichung’s Houli District (后里) and Powerchip Semiconductor Manufacturing Corp’s (力積電) fab in Miaoli County’s Tongluo Township (銅鑼).
In the mid to long term, the company would gain support from an uptrend in the semiconductor equipment sector, as the US and China intend to build their own semiconductor supply chains at home, the analysts said.
UIS shares have risen 10.19 percent since the beginning of this year, trailing behind the bellwether electronics sector’s 13.71 percent increase and the TAIEX’s 16.39 percent advance over the same period.
The stock on Friday declined 1.24 percent to NT$238.
The company plans to pay out a cash dividend of NT$17 per share on June 26, representing a dividend yield of 7.14 percent.
Yuanta maintained its “buy” rating for UIS considering the stock’s attractive valuation and high dividend yield, but reduced its target price for the stock to NT$280, from NT$300 previously, as the company is facing slower than expected sales growth due to transitions from old projects to new ones, it added.
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