Another strong results and guide; Bullish L-T outlook. 4Q21 results came

in better than expected, with revenue rising 6% QoQ to TWD438bn and GM rising 140bps QoQ to 52.7%. TSMC raised L-T revenue/GM guidance given the company’s bullish growth outlook and continued focus on profitable growth. TSMC expects the foundry market growth to remain strong and its capacity to remain tight throughout 2022. TSMC plans to increase its capex spending again, with its capex rising by 40% to $40-42bn capex in 2022. We believe TSMC is in a structurally stronger growth cycle and the capex investments today will lead to a continued strong rev/earnings growth in the coming years. Despite the risk of an inventory correction, we believe TSMC is better positioned to weather any temporary slowdown given its strength in advanced technology and its strength in 5G/HPC. We raise our 2022E/2023E EPS est by 4%/5% and raise our PT from TWD710 to TWD800, based on 26x 2022E P/E (prev 24x). Reiterate BUY.

Another record quarter and solid guide; Capex to rise 40% to $40-44bn in 2022. 4Q21 revenue/EPS rose 6%/6% QoQ to a record TWD438bn/TWD6.41 (vs. TWD436bn/TWD6.22 consensus). GM rose 140bps QoQ to 52.7% on continued cost improvement (vs. 52.0% consensus). TSMC expects rev/GM of $16.9bn/54% in 1Q22 (vs $15.8bn/51.7% consensus) driven by HPC/ Autos and milder smartphone seasonality. OM to increase 130bps QoQ to 43% in 1Q22.

Capex spending is rising dramatically again, as the company plans to invest $40-44bn in capex in 2022, up 40% YoY and representing 57% of sales (vs. $36bn consensus). TSMC expects its capacity to remain tight throughout 2022. N3 development is on track for volume production in 2H22.

Long term bullish; Investing for tomorrow’s growth. TSMC remains bullish on the long term growth potential, as the semiconductor industry enters a structural growth period. The company expects the semiconductor market to remain strong, growing 9% in 2022, with foundry growing nearly 20% and TSMC growing 25-29%. The company also raised its LT growth guidance and now expects its revenue to grow 15-20% (prev 10-15%) and GM of 53%+ (prev 50%+), underscoring the company’s bullish growth outlook and continued focus on profitable growth. We believe TSMC’s high capex investment today will lead to

strong revenue and earnings growth in the upcoming years.

Raising est and PT; Reiterate BUY. We continue to believe TSMC is in a multi-year strong growth period. The investment being made today will lead to strong growth in revenue/EPS. FCF should nearly double from 2021 to 2023, which should lead to a higher dividend payment in the future, as we saw during the previous growth period in 2010-2013. We raise our 2022E/2023E EPS estimate by 4%/5% on strong demand and higher ASP and raise our PT from TWD710 to TWD800 based on 26x 2022E P/E (prev. 24x), supported by high ROE of 33% in 2022. TSMC remains a core holding in our view. Reiterate BUY.

2330 TT

TSMC

Asia Technology

Another record quarter; remain bullish L-T

A Defensive Play; Strong L-T Growth Story

Another Record Quarter; Raising Est/PT

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