Analyst Note| Phelix Lee |
We slightly raise our fair value estimate for Taiwan Semiconductor Manufacturing, or TSMC, to TWD 800 per share (USD 143 per ADR) from small increases in 2022-23 revenue, partially offset by incremental capital expenditure from the company’s newly confirmed Japan plant. The stock continues to be undervalued in our view, as we think there is still upside in its capital expenditure budget, a proxy of its future revenue, and blended ASP after customers become receptive to price hikes and making prepayments to secure capacity. We now think the chip shortage will remain for the whole of 2022, as structural growth from the likes of data centers, computing systems, and 5G-related content prevent the company from fully clearing backlogs from industrial applications. Short-term corrections in smartphone and PC shipments are not enough to dampen these trends that TSMC is enjoying, in our view.