Taipei--An Asian brokerage has raised its target price on shares in contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC, ???) on the back of global growth in the industrial and home robot sector.
In a research note, the brokerage said that TSMC, the world's largest contract chip maker, will benefit from its lead in high-end chip production technology at a time when development in the robot business has accelerated.
The company's ability to meet demand from the emerging robot industry also demonstrates the diversification of TSMC's product portfolio, the brokerage said.
As a result, the brokerage has upgraded its target price on TSMC shares from NT$215.00 to NT$228.00 (US$7.57), while leaving an "outperform" recommendation on the stock unchanged.
CNA cannot identify the brokerage because media outlets in Taiwan are not allowed to report the name of a foreign brokerage when it gives price forecasts for specific stocks.
On Friday, TSMC, the most heavily weighted stock on the local market, fell 0.47 percent to close at NT$212.00, after hitting an early high of NT$215.00, as investors locked in earlier gains.
The research note reinforced market confidence in TSMC's outlook after Morris Chang (???), chairman of the chip maker, said at an annual general meeting on Thursday that the company's sales will grow 5-10 percent a year by 2020, outperforming the global semiconductor industry.
Optimism over TSMC's operations has driven the firm's share price sharply higher in recent sessions. As TSMC is the most heavily weighted stock on the Taiwan Stock Exchange, the gains have also boosted the weighted index on the main board.
Since the beginning of this year, TSMC shares have gained about 17 percent, while the weighted index has added more than 10 percent.
The brokerage said that robot development is expected to increase demand for chips used in a wide range of applications, such as sensors, microcontrollers, Internet connection devices and power management systems, so that Broadcom Inc., a key TSMC client is expected to contribute 5-7 percent of the Taiwanese firm's total sales.
In addition, development in high power computing and artificial intelligence will also boost shipments of TSMC's high-end chips, which will help the chip maker secure orders from NVidia Inc., another important customer, the brokerage said.
The brokerage said TSMC's compound annual sales growth rate from 2017-2019 will range from 11-12 percent with earnings per share expected to hit NT$13.19, NT$15.18 and NT$16.48, respectively, in 2017, 2018 and 2019, compared with NT$12.89 in 2016.
On Friday, TSMC reported a 28 percent month-on-month increase in sales for May, helping the chip maker recover from April when revenue fell 30 percent to a 37-month low, as many of its customers started to rebuild their inventories.
Source: Focus Taiwan News Channel