Stock Report | July 19, 2024 | NYSESymbol: TSM

Taiwan Semiconductor Manufacturing Company Limited

Recommendation Price 12-Mo. Target Price Report Currency
BUY « « « « « USD 171.20 (as of market close Jul 17, 2024) USD 203 TWD
Equity Analyst Hazim Bahari, CFA

GICS Sector Information Technology Summary Taiwan Semiconductor Manufacturing Co. (TSMC) is the world’s largest pure-play
Sub-Industry Semiconductors semiconductor foundry by revenue.

Key Stock Statistics (Source: CFRA, S&P Global Market Intelligence (SPGMI), Company Reports)
52-Wk Range USD 193.47 - 84.02 Oper.EPS2024E TWD 196.58 Market Capitalization[B] USD 820.26 Beta 1.15
Trailing 12-Month EPS TWD 165.28 Oper.EPS2025E TWD 265.22 Yield [%] 1.14 3-yr Proj. EPS CAGR[%] 23
Trailing 12-Month P/E 33.73 P/E on Oper.EPS2024E 28.36 Dividend Rate/Share USD 1.95 SPGMI's Quality Ranking NR
USD 10K Invested 5 Yrs Ago 44,478.0 Common Shares Outstg.[M] 25,934.00 Trailing 12-Month Dividend USD 2.09 Institutional Ownership [%] 38.0

Price Performance Update: please see the analyst's latest research note
in the research notes section

Analyst's Risk Assessment

LOW MEDIUM HIGH

Our risk assessment reflects the company’s solid product
differentiation, which drives strong sales and pricing
power. Consequently, this allows for strong free cash flow
generation despite the high capital spending requirements
of the contract foundry industry.

Revenue/Earnings Data

Revenue (Billion TWD)

1Q 2Q 3Q 4Q Year
2025 -- -- -- -- E 3,350
2024 593 -- -- -- E 2,702
2023 509 481 547 626 2,162
2022 491 534 613 625 2,263
Source: CFRA, S&P Global Market Intelligence 2021 362 372 414 438 1,587
Past performance is not an indication of future performance and should not be relied upon as such. 2020 311 311 356 361 1,339
Analysis prepared by Hazim Bahari, CFA on Jul 19, 2024 01:14 AM, when the stock traded at USD 172.
Earnings Per ADS (TWD)
1Q 2Q 3Q 4Q Year
Highlights Latest Analyst Research Notes
2025 -- -- -- -- E 265.22
u The 12-month target price has recently been July 19, 2024 2024 44.12 -- -- -- E 196.58
changed to USD 203 from USD 179.00. The 01:15 am ET.. CFRA Keeps Buy Opinion on ADSs of 2023 39.96 35.53 41.51 44.12 158.70
Highlights section of this Stock Report will be Taiwan Semiconductor Mfg. Co. (TSM 172****) 2022 40.11 46.12 56.90 57.05 196.02
updated accordingly. We lift our target price to USD203 (from USD179) 2021 27.35 25.90 30.15 32.05 115.03
u The Investment Rationale/Risk section of this on a higher 2025 P/E of 25x (from 23x), which 2020 22.76 23.30 26.47 27.55 99.85
Stock Report will be updated shortly. For the now implies a 27% premium to TSMC’s 5-year Fiscal Year ended Dec 31. EPS Estimates based on CFRA's
latest News story on TSM from MarketScope, mean NTM P/E. We also raise our EPS forecasts to Operating Earnings; historical earnings are adjusted. In periods
see aside. TWD196.58 (from TWD184.33) for 2024 and to where a different currency has been reported, this has been
TWD265.22 (from TWD251.47) for 2025, mainly adjusted to match the current quoted currency.
reflecting our upgraded operating margin
assumptions (42%/48% in 2024/2025, vs. 42.6% Dividend Data
in 2023). Key profitability tailwind will be the likely
Amount Date Ex-Div. Stk. of Payment
wafer price hikes for N3/N5/advanced packaging
(USD) Decl. Date Record Date
capacities, in our view, which TSMC expects to
remain in tight supply potentially until 2026 due to 0.4865 May 10 Sep 12 Sep 12 Oct 09 '24
strong capacity demand for AI accelerators and 0.4265 Feb 06 Jun 13 Jun 13 Jul 11 '24
edge-AI (AI PC, AI smartphones). In Q2 2024, TSMC 0.4310 -- Mar 18 Mar 19 Apr 11 '24
posted EPS +36% to TWD47.80, above our 0.3818 Aug 08 Dec 14 Dec 15 Jan 11 '24
expectations, mainly on higher wafer ASP (+31%), Dividends have been paid since 2004. Source: Company reports
which also boosted revenue (+40% to TWD673.5 Past performance is not an indication of future performance
bln). Yet, operating profit margin only expanded by and should not be relied as such.
0.5%-pts to 42.5% as the margin support was Forecasts are not a reliable indicator of future performance.
mostly offset by yield dilution from N3 ramp-up, Dividends paid in currencies other than the Trading currency have
migration costs (from N5 to N3), and higher been accordingly converted for display purposes.
electricity costs in Taiwan.
/ Hazim Bahari, CFA

Redistribution or reproduction is prohibited without written permission. Copyright ©2024 CFRA. This document is not intended to provide personal investment advice and it does not take into account the specific investment
objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek independent financial advice regarding the suitability and/or appropriateness of making an investment
or implementing the investment strategies discussed in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such investments, if any,
may fluctuate and that the value of such investments may rise or fall. Accordingly, investors may receive back less than they originally invested. Investors should seek advice concerning any impact this investment may have on
their personal tax position from their own tax advisor. Please note the publication date of this document. It may contain specific information that is no longer current and should not be used to make an investment decision. Unless
otherwise indicated, there is no intention to update this document.
1
Stock Report | July 19, 2024 | NYSESymbol: TSM
Taiwan Semiconductor Manufacturing Company Limited
Business Summary May 31, 2024 Corporate information

CORPORATE OVERVIEW: Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) manufactures Investor contact
semiconductors using advanced production processes for customers based on its own or third parties’ J. Su (886 3 563 6688)
proprietary integrated circuit (IC) designs. TSMC manufactures semiconductors on silicon wafers based on
proprietary circuitry designs provided by customers or third-party designers. TSMC offers a wide range of Office
leading-edge wafer fabrication processes, including processes to manufacture CMOS logic, mixed-signal, N/A
radio frequency and embedded memory, and BiCMOS mixed-signal and other semiconductors.
Telephone
TSMC manufactured 12,698 products for a total of 532 customers in 2022 (latest available). TSMC’s key
886 3 563 6688
fabless customers include Apple, MediaTek, Broadcom, Nvidia, and Qualcomm. The company also serves
integrated device manufacturers (IDMs), including Advanced Micro Devices, Intel, Analog Devices, Freescale Fax
Semiconductor, and STMicroelectronics; these “fabbed” semiconductor makers seek foundries for a portion 886 3 563 7000
of their wafer manufacturing needs.
Website
Each ADS represents five shares of Taiwan Semiconductor Manufacturing Co. Ltd.
www.tsmc.com
SEGMENT OVERVIEW: TSMC mainly breaks down its revenue by chip processing - also known as node -
technology, with smaller ones allowing for chip production with higher transistor density. This translates into
Officers
more speed with less power consumption as the distance between transistors (on the chip) lessens. TSMC
breaks down its 2023 revenue into twelve node categories, with the most advanced ones being 3nm (6% of Chairman & CEO Senior VP of Legal,
2023 revenue), 5nm (33%), and 7nm (19%). The remaining technologies – also known as specialty nodes – C. Wei General Counsel &
make up 42% of 2023 revenue. TSMC also reports its revenue by geographical areas: North America (68% of Corporate Governance
Senior VP of Finance & CFO Officer
2023 revenue), Asia Pacific (8%), China (12%), Europe and Middle East (6%), and Japan (6%). J. Huang S. Fang
INDUSTRY OVERVIEW: Given that independent foundries form the production backbone for fabless
semiconductor players and integrated device manufacturers, long-term success within the dedicated
foundry industry depends on production size flexibility, chip process leadership, and consistently reliable Board Members
execution. TSMC is arguably the best in all three areas collectively, in our view. According to Counterpoint C. Lin L. Reif
Research, TSMC holds 59% market share in the foundry industry in Q3 2023, with Samsung Electronics C. Liu M. Gavrielov
second at 13% and United Microelectronics coming third at 6%.
C. Wei M. R. Splinter
CORPORATE STRATEGY: To remain competitive, TSMC intends to maintain its strategy of expanding
manufacturing capacity and improving manufacturing process technology to meet both the fabrication and F. Tseng P. L. Bonfield
the technological needs of its customers. Based on estimates of market demand, TSMC expects to continue L. L. Elsenhans U. M. Burns
adding capacity to its 300mm wafer fabs, particularly for its most advanced node processes. The company
thinks that the main factors that affect its sales results are the worldwide demand for semiconductor
Domicile Auditor
products, pricing, worldwide production capacity including its own, capacity utilization, technology
Taiwan Deloitte & Touche LLP
migrations, and fluctuations in the foreign currency exchange rates.
FINANCIAL TRENDS: For the past five years (up till and including 2023), TSMC’s revenue grew at a CAGR of Founded
16%, while net income grew at a CAGR of 21%. During this period, the company’s total dividend payout grew 1987
at a CAGR of 8%, with an average dividend payout ratio of 45.0%. TSMC has also maintained a net cash
position throughout the past five years. Employees
65,152
TSMC’s Q4 2023 results were better than our expectations: EPS of TWD921 (-19% Y/Y, +13% Q/Q), OP of
TWD260 bln (-20% Y/Y, +14% Q/Q), and revenue of TWD625 bln (0% Y/Y, +14% Q/Q). Stockholders
N/A

Redistribution or reproduction is prohibited without prior written permission. Copyright ©2024 CFRA. 2
Stock Report | July 19, 2024 | NYSESymbol: TSM
Taiwan Semiconductor Manufacturing Company Limited
Quantitative Evaluations Expanded Ratio Analysis

Fair Value Rank NR 1 2 3 4 5 2023 2022 2021 2020

Lowest Highest Price/Sales 61.15 41.94 87.14 94.90
Based on CFRA's proprietary quantitative model, Price/EBITDA 91.49 61.19 129.79 142.48
stocks are ranked from most overvalued (1) to most Price/Pretax Income 135.00 82.97 208.60 217.34
undervalued (5). P/E Ratio 20.08 11.34 29.20 32.07
Avg. Diluted Shares Outstg. (M) 25,929 25,929 25,930 25,930
Fair Value N/A
Calculation Figures based on fiscal year-end price

Volatility LOW AVERAGE HIGH

Technical NEUTRAL Since January, 2024, the technical indicators for TSM Key Growth Rates and Averages
Evaluation have been NEUTRAL"
Past Growth Rate (%) 1 Year 3 Years 5 Years
Insider Activity NA UNFAVORABLE NEUTRAL FAVORABLE Net Income NM 17.97 18.22
Sales -4.51 17.30 15.95

Ratio Analysis (Annual Avg.)

Net Margin (%) 38.79 40.42 38.50
% LT Debt to Capitalization 20.54 21.10 15.26
Return on Equity (%) 26.00 31.81 29.34

Company Financials Fiscal year ending Dec 31

Per ADS Data (TWD) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Tangible Book Value 132.51 112.60 82.59 69.77 61.44 63.38 57.06 51.85 45.50 38.90
Free Cash Flow 11.05 20.09 10.18 11.80 5.61 9.69 9.62 7.97 10.34 4.98
Earnings 32.34 39.20 23.01 19.70 13.65 14.00 13.30 12.79 11.68 9.81
Earnings (Normalized) 158.70 201.84 114.17 95.52 66.55 68.57 64.57 64.75 61.34 53.11
Dividends 13.00 11.00 11.00 10.00 9.50 8.00 8.00 7.00 6.00 4.50
Payout Ratio (%) 34.79 28.06 44.55 50.77 73.26 57.14 52.61 46.90 38.53 30.59
Prices: High 3,391 4,006 3,986 3,084 1,801 1,362 1,289 998.59 786.99 730.23
Prices: Low 2,267 1,917 3,014 1,300 1,055 1,090 918.90 681.17 568.93 498.47
P/E Ratio: High 21.40 22.10 34.50 32.30 26.80 20.80 19.80 15.80 13.90 14.00
P/E Ratio: Low 14.20 9.00 26.10 12.60 15.40 15.70 13.40 10.20 9.30 9.80

Income Statement Analysis (Billion TWD)

Revenue 2,162 2,264 1,587 1,339 1,070 1,031 977.00 948.00 844.00 763.00
Operating Income 921.00 1,122 650.00 567.00 377.00 388.00 387.00 378.00 322.00 297.00
Depreciation + Amortization 527.00 432.00 418.00 328.00 283.00 290.00 258.00 222.00 221.00 199.00
Interest Expense 12.00 12.00 5.00 2.00 3.00 3.00 3.00 3.00 3.00 3.00
Pretax Income 979.00 1,144 663.00 585.00 390.00 398.00 396.00 386.00 350.00 302.00
Effective Tax Rate 14.40 11.10 10.00 12.60 9.20 8.70 12.90 14.00 13.60 15.90
Net Income 838.00 1,017 597.00 511.00 354.00 363.00 345.00 332.00 303.00 254.00
Net Income (Normalized) 613.00 715.50 414.00 364.20 245.80 251.50 248.20 241.30 204.90 188.40

Balance Sheet and Other Financial Data (Billion TWD)

Cash 1,688 1,561 1,205 802.00 594.00 714.00 656.00 636.00 590.00 440.00
Current Assets 2,194 2,053 1,607 1,092 823.00 952.00 857.00 818.00 747.00 627.00
Total Assets 5,532 4,965 3,726 2,761 2,265 2,090 1,992 1,886 1,657 1,495
Current Liabilities 914.00 944.00 740.00 632.00 598.00 357.00 387.00 348.00 240.00 225.00
Long Term Debt 918.00 839.00 613.00 256.00 25.00 57.00 92.00 153.00 192.00 214.00
Total Capital 4,470 3,851 2,927 2,205 1,807 1,842 1,708 1,609 1,450 1,273
Capital Expenditures 950.00 1,083 839.00 507.00 460.00 316.00 331.00 328.00 258.00 289.00
Cash from Operations 1,242 1,611 1,112 823.00 615.00 574.00 585.00 540.00 530.00 422.00
Current Ratio 2.40 2.17 2.17 1.73 1.37 2.67 2.22 2.35 3.11 2.79
% Long Term Debt of Capitalization 20.50 21.80 21.00 11.60 1.40 3.10 5.40 9.50 13.20 16.80
% Net Income of Revenue 38.80 44.90 37.60 38.10 33.10 35.20 35.30 35.00 35.90 33.30
% Return on Assets 10.97 16.14 12.53 14.09 10.81 11.87 12.46 13.33 12.76 13.45
% Return on Equity 26.00 39.60 29.80 29.60 21.60 23.00 24.20 26.00 27.30 27.20

Source: S&P Global Market Intelligence. Data may be preliminary or restated; before results of discontinued operations/special items. Per share data adjusted for stock dividends; EPS diluted.
E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked. UR-Under Review.

Redistribution or reproduction is prohibited without prior written permission. Copyright ©2024 CFRA. 3
Stock Report | July 19, 2024 | NYSESymbol: TSM
Taiwan Semiconductor Manufacturing Company Limited
Sub-Industry Outlook Industry Performance

We have a positive fundamental outlook for the as the key to greater machine learning/ GICS Sector:Information Technology
Semiconductors sub-industry over the next 12 inferencing capabilities in the cloud, but we do Sub-Industry:Semiconductors
months. We expect semiconductor sales to see a place for both FPGAs and ASICs looking Based on S&P 1500 Indexes
rebound about 15%-20% in 2024 and an ahead. On the GPU side, we expect supply Five-Year market price performance through Jul 13, 2024
additional 10%-12% in 2025 after a 12% decline constraints to begin to improve, while AMD’s
in 2023, with a cyclical recovery that began in the ramp with its MI300X GPU will also help
second half of last year (Y/Y revenue growth support demand for accelerators and NVDA will
returned in Q4 2023). We do think the rebound in launch next-gen GPUs. Chipmakers tied to the
2024, from a component perspective, will see the data center are exposed to the best financially
most pronounced upside from memory, while the positioned customers on the planet, and
industry also benefits from higher capital prospects tied to AI are extremely encouraging.
spending on greater GenAI capabilities (e.g., new We believe the semiconductor industry will
computing and networking tools) among the witness a super cycle over the next decade as
major cloud providers. Investors should be mindful content growth per device across a host of
that the chip industry is undergoing cycles within markets accelerates, driven by the emergence
cycles, with data centers gaining momentum and of greater AI capabilities. Given this, we
more mature/cyclical PC/smartphone orders estimate the semiconductors industry will grow
having officially bottomed out. Analog chips tied to at a 10-year annualized pace of 6%-7%, or at
industrial/auto markets have see orders decline by least 2x global GDP.
30% or more in many instances, but content
growth and undershipping true demand should set While companies that outsource
up that space for an order rebound as we progress manufacturing would typically have more
into the second half of 2024. stability in gross margins (a trade-off for
capped upside), others with their own
Within memory, we favor the fundamentals on the manufacturing see more variability. Industry
DRAM side, given AI prospects are tied to high margins are a function of manufacturing
bandwidth memory (HBM). Inventories are seen utilization and inventory supply-demand
considerably improving, as we believe industry imbalances. We forecast some companies,
capacity cuts have better aligned the supply/ especially in analog, to maintain higher
demand landscape, with further tightening inventory levels. Healthy free cash flow and
expected through 2024. For the most part, high cash levels will likely result in greater
investments from key players will be focused on shareholder return via share repurchases.
technology upgrades rather than capacity Regulatory and geopolitical uncertainties are
upgrades until industry profitability significantly risks. NOTE: A sector chart appears when the sub-industry does not have
rebounds (we view calendar year 2025 as more of sufficient historical index data.
an investment year). We would be skeptical of the YTD through June 20, the S&P Semiconductors All Sector & Sub-Industry information is based on the Global Industry
trajectory of the recovery if macroeconomic sub-industry rose 82%, above the 13.7% Classification Standard (GICS).
conditions deteriorate and/or major competitor increase for the S&P 1500. Past performance is not an indication of future performance and should
Samsung were to all of a sudden boost capex / Angelo Zino, CFA not be relied upon as such.
spend. Source: CFRA, S&P Global Market Intelligence

We look for the accelerator space to grow at least

70%-80% in 2024. Ever since Microsoft’s
monumental decision to boost investments in
OpenAI, our forecast for the accelerator space has
continued to go up. The major beneficiary has, of
course, been GPUs, which have been designated

Sub-Industry: Semiconductors Peer Group*: Semiconductors

Recent 30-Day 1-Year Fair Return
Stock Stock Stk. Mkt. Price Price P/E Value Yield on Equity LTD to
Peer Group Symbol Exchange Currency Price Cap. (M) Chg. (%) Chg. (%) Ratio Calc. (%) (%) Cap (%)

Taiwan Semiconductor Manufacturing Company Limited TSM NYSE USD 171.20 818,701.0 -3.4 66.0 34.0 N/A 1.1 25.3 20.7
Advanced Micro Devices, Inc. AMD NasdaqGS USD 159.43 257,689.0 0.6 35.2 60.0 141.96 N/A 2.0 2.9
Analog Devices, Inc. ADI NasdaqGS USD 235.61 116,914.0 1.4 19.9 31.0 179.15 1.6 6.0 15.2
Arm Holdings plc ARM NasdaqGS USD 161.70 168,221.0 0.9 N/A 558.0 98.63 N/A 6.5 N/A
Broadcom Inc. AVGO NasdaqGS USD 155.98 726,069.0 -14.7 72.6 36.0 1,208.60 13.5 22.2 49.7
Intel Corporation INTC NasdaqGS USD 34.46 146,692.0 11.2 -0.1 27.0 38.95 1.5 3.8 29.3
Marvell Technology, Inc. MRVL NasdaqGS USD 67.93 58,800.0 -5.4 3.3 47.0 N/A 0.4 -6.5 21.4
Micron Technology, Inc. MU NasdaqGS USD 119.50 132,507.0 -19.2 84.0 NM N/A 0.4 -3.4 19.3
NXP Semiconductors N.V. NXPI NasdaqGS USD 276.29 70,643.0 1.8 23.5 20.0 N/A 1.5 32.7 52.7
QUALCOMM Incorporated QCOM NasdaqGS USD 191.60 213,826.0 -13.8 56.0 21.0 219.19 1.8 38.3 36.4
Texas Instruments Incorporated TXN NasdaqGS USD 204.26 185,975.0 4.8 11.2 32.0 172.11 2.5 36.7 41.2

*For Peer Groups with more than 10 companies or stocks, selection of issues is based on market capitalization.
NA-Not Available; NM-Not Meaningful.
Note: Peers are selected based on Global Industry Classification Standards and market capitalization. The peer group list includes companies with similar characteristics, but may not include all the companies within the same
industry and/or that engage in the same line of business.

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Stock Report | July 19, 2024 | NYSESymbol: TSM
Taiwan Semiconductor Manufacturing Company Limited
Previous Analyst Research Notes and Company News

May 27, 2024 CFA

12:08 AM ET... CFRA Keeps Buy Rating on ADSs of Taiwan Semiconductor Mfg. Co.
(TSM 157.00****): December 29, 2023
TSM rose 18% since our last update in April. We believe near-term sentiment was 12:06 AM ET... CFRA Keeps Buy Opinion on ADSs of Taiwan Semiconductor Mfg. Co.
mostly boosted by TSM’s monthly revenue growth which accelerated to +59.6% Y/Y (TSM 104.00****):
in April from +34.3% Y/Y in March. Despite the rally, we think TSM could see further We raise our target price to USD117 (from USD105) on a higher valuation of 19x
valuation expansion given (i) its moat in AI-related semiconductors market 2024 P/E (from 18x), now equal to the stock’s 5-year average. With market focus
underpinned by TSM’s more than 90% market share for process nodes 5nm and shifting towards long-term dynamics, we see TSMC’s valuation multiple expanding
below; (ii) positive news flow surrounding global investments into generative AI; and from strong HPC (43% revenue mix in Q3) growth outlook driven by its technology
(iii) the stock’s implied valuation of 21x 2025 EPS (CapIQ consensus), only slightly leadership in AI chips, while consumer chip sales (about 40% mix) is also bottoming
above the 5-year mean P/E of 20x. As such, we retain our Buy rating on TSM and after heavy corrections in mid-2023. Notably, TSMC’s revenue rebounded to over
raise our target price to USD179 (from USD155). Our valuation of 23x 2025 P/E TWD200 bln in Oct. and Nov., following lower figures in the prior eight months. For
implies a 15% premium to the 5-year average P/E, reflecting TSM’s strong EPS 2024-2025, we forecast 13%-17% revenue growth (2023E: -3%) with EBIT margin
growth outlook (projected at +14% in 2024 and +36% in 2025), earnings exposure widening to about 43% (2023E: 41%) from improved N5/N7 capacity utilization and
to structural semiconductor demand, and resilient balance sheet and liquidity to increased N3 sales mix. Near-term industry recovery trend remains uncertain due to
support future investments. / Hazim Bahari, CFA macro concerns, but the lack of earnings downside risk and robust secular growth
makes TSMC attractive at current valuation levels in our view. We keep our forecasts
April 19, 2024 unchanged. / Hazim Bahari, CFA
12:48 AM ET... CFRA Keeps Buy Opinion on ADSs of Taiwan Semiconductor Mfg. Co.
(TSM 133.00****): October 20, 2023
We lift our target price to USD155 (from USD140), now valuing the stock at 20x 01:32 AM ET... CFRA Keeps Buy Opinion on ADSs of Taiwan Semiconductor Mfg. Co.
2025 P/E (from 23x 2024 P/E), with the valuation year pushout reflecting the (TSM 89.00****):
market’s increasing focus on TSM’s long-term earnings growth potential. Q1 2024’s We lower our target price to US$105 (from US$115) while retaining the valuation at
earnings came in within our expectations with earnings per ADS (EPADS) of 18x 2024 P/E, slightly below the 5-year mean (19x). Q3 2023 result met our
TWD43.50 (+9% Y/Y, -6% Q/Q due mostly to smartphone seasonality) and revenue expectations despite Y/Y declines (EPS -25% to TWD8.14, OP -27% to TWD228 bln,
of TWD592 mln (+17% Y/Y, -5% Q/Q). TSM highlighted several near-term revenue -11% to TWD546 bln, and OP margin -8.9%ppt to 41.7%), unsurprising
profitability headwinds ahead, including (i) a slight 0.5%-pts gross margin impact in given the semi downcycle. On a Q/Q basis, we are observing signals of bottoming
Q2 2024 from the April 3rd earthquake; (ii) +25% electricity cost from April 1st; and demand for TSMC in the form of wafer shipments (flat in Q3, after -10% in Q2 and -
(iii) margin dilution from 3nm ramp-up. Consequently, we cut our 2025 EPADS 19% in Q1) and ASP (+14% in Q3). Still, we now expect slower revenue growth in
forecast to TWD184.33 (from TWD192.89) in 2024 but raise 2025’s to TWD251.47 2024 (to +17%, from +23%) given slow inventory destocking and lack of end-
(from TWD241.66) as we upgrade our revenue assumptions mainly for leading-edge demand rebound in consumer markets (PC, smartphone, tablets) affecting N5/N7
nodes. We continue to like TSM given its growing AI exposure, dominant market order recovery, while the N3 ramp remains a key tailwind. OP margin should stay
share at leading-edge, and resilient balance sheet/FCF to support future above 40% despite N3 initial yield dilution, offset by delayed capex, tighter cost
investments. / Hazim Bahari, CFA control, and favorable FX. We adjust our EPS forecasts to TWD156.20 (from
TWD156.21) for 2023 and to TWD189.25 (from TWD198.93) for 2024. / Hazim
February 23, 2024 Bahari, CFA
05:43 AM ET... CFRA Keeps Buy Opinion on ADSs of Taiwan Semiconductor Mfg. Co.
(TSM 129.07****): July 20, 2023
TSM has gained 18% since our last update in January. Market sentiment was 09:44 AM ET... CFRA Lowers Opinion on ADSs of TSM Limited to Buy from Strong Buy
particularly boosted by January’s revenue growth of 7.9% Y/Y (or 22.4% Q/Q) to (TSM 97.58****):
TWD215 bln, which was higher than every month of 2023 except October (TWD243 We lift our target price to $115 from $102 as we roll our valuation forward to 18x
bln). Given the unexpectedly strong revenue recovery, we upgrade our 2024 revenue 2024 P/E (from 20x 2023 P/E), slightly below the five-year mean of 19x. TSM’s Q2
growth assumption to 25% (from 20%), now in line with TSM’s expectation (low-mid results came in within our expectations despite the lower EPS (-23% Y/Y to
20% growth in USD terms), with no change to our 2025 topline growth and TWD35.05). Wafer shipment (-23% Y/Y) declined amid continued inventory
2024/2025 OPM estimates. We then raise our 2024/2025 EPS estimates to destocking among TSM’s clients, dragging down revenue (-10% Y/Y to TWD480
TWD192.89/TWD241.66 (from TWD185.08/TWD232.16). TSM’s earnings growth billion) and OP margin (-7.1%-pts to 42.0%, mainly from a lower utilization rate). We
visibility through 2026 remains robust, underpinned by its leadership in AI chips see gradual EPS recovery in 2H 2023 due to sluggish end-demand outlook, but
(near-100% share), improving gross margin, and node progression (strong N3 anticipate a strong rebound in 2024 driven by strong N3 ramp (APPL, AMD, NVDA,
ramp-up, N2 to start manufacturing in 2025). To reflect investors’ increasing focus QCOM) and cyclical recovery for N5/N7. Our EPS estimates, which imply -20% in
on TSM’s earnings longevity, we raise our target 2024 P/E valuation to 23x (from 2023 and +27% in 2024, are unchanged. Still, we lower our rating to Buy from
19x) and lift the target price to USD140 (from USD115). / Hazim Bahari, CFA Strong Buy given the smaller upside after the recent stock surge (+22% since May).
We expect the stock to trade sideways in the short term, with P/E supported by
January 18, 2024 strong market interest in TSM’s foundational role in AI. / Hazim Bahari, CFA
11:58 AM ET... CFRA Keeps Buy Opinion on ADSs of Taiwan Semiconductor Mfg. Co.
(TSM 111.45****):
TSMC’s Q4 2023 results were better than our expectations: EPS of TWD46.03 (-19%
Y/Y, +13% Q/Q), OP of TWD260 bln (-20% Y/Y, +14% Q/Q), and revenue of TWD625
bln (flat Y/Y, +14% Q/Q). We reiterate our belief that earnings have bottomed out
with wafer shipment (+2% Q/Q) and OP margin (-0.1%-pts Q/Q to 41.6%) leveling
off following the downtrends in 1H 2023. This sets TSMC up for 19%-20% revenue
growth in 2024-2025 (2023: -4.5%) in our forecast, as the company captures
opportunities within the AI, cloud, and 5G megatrends driving its HPC segment (43%
sales mix). We anticipate slight pressure on OP margin to 41% in 2024 (2023:
42.6%) due to dilution from the N3 and N3E ramp-ups, before rebounding to 43% in
2025 as the overall wafer yield improves. We trim our 2024 EPS forecast to
TWD185.08 from TWD189.25 and initiate our 2025 EPS at TWD232.16. We retain
our Buy rating with an adjusted target price of USD115 from USD117, valuing TSMC
at an unchanged 2024 P/E of 19x, on par with its five-year average. / Hazim Bahari,

Note: Research notes reflect CFRA's published opinions and analysis on the stock at the time the note was published. The note reflects the views of the equity analyst as of
the date and time indicated in the note, and may not reflect CFRA's current view on the company.
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Stock Report | July 19, 2024 | NYSESymbol: TSM
Taiwan Semiconductor Manufacturing Company Limited
Analysts Recommendations Wall Street Consensus Opinion

Buy

Wall Street Consensus vs. Performance

For fiscal year 2024, analysts estimate that TSM will earn
TWD 6.40. For fiscal year 2025, analysts estimate that
TSM's earnings per share will grow by 28.18% to TWD 8.20.

No. of
Recommendations % of Total 1 Mo.Prior 3 Mos.Prior
Buy 8 53 8 8
Buy/Hold 5 33 5 4
Hold 1 7 1 3
Weak hold 0 0 0 0
Sell 0 0 0 0
No Opinion 1 7 1 1
Total 15 100 15 16

Wall Street Consensus Estimates

Fiscal Year Avg Est. High Est. Low Est. # of Est. Est. P/E
2025 8.20 9.33 7.40 9 20.87
2024 6.40 6.64 6.20 9 26.75
2025 vs. 2024 p 28% p 41% p 19% N/A% q -22%

Q2'25 1.90 2.23 1.68 4 89.87

Q2'24 1.42 1.50 1.35 6 120.26
Q2'25 vs. Q2'24 p 34% p 49% p 24% q -33% q -25%
Forecasts are not reliable indicator of future performance.
Note: A company's earnings outlook plays a major part in any investment decision. S&P Global Market Intelligence organizes the earnings estimates of over 2,300 Wall Street analysts, and
provides their consensus of earnings over the next two years, as well as how those earnings estimates have changed over time. Note that the information provided in relation to consensus
estimates is not intended to predict actual results and should not be taken as a reliable indicator of future performance.
Note: For all tables, graphs and charts in this report that do not cite any reference or source, the source is S&P Global Market Intelligence.

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Stock Report | July 19, 2024 | NYSESymbol: TSM
Taiwan Semiconductor Manufacturing Company Limited
Glossary

STARS Abbreviations Used in Equity Research Reports

Since January 1, 1987, CFRA Equity and Fund Research Services, and its CAGR - Compound Annual Growth Rate
predecessor S&P Capital IQ Equity Research has ranked a universe of U.S. CAPEX - Capital Expenditures
common stocks, ADRs (American Depositary Receipts), and ADSs (American CY - Calendar Year
Depositary Shares) based on a given equity's potential for future performance. DCF - Discounted Cash Flow
Similarly, we have ranked Asian and European equities since June 30, 2002. DDM - Dividend Discount Model
Under proprietary STARS (Stock Appreciation Ranking System), equity analysts EBIT - Earnings Before Interest and Taxes
rank equities according to their individual forecast of an equity's future total EBITDA - Earnings Before Interest, Taxes, Depreciation & Amortization
return potential versus the expected total return of a relevant benchmark (e.g., EPS - Earnings Per Share
a regional index (MSCI AC Asia Pacific Index, MSCI AC Europe Index or S&P 500® EV - Enterprise Value
Index)), based on a 12-month time horizon. STARS was designed to help FCF - Free Cash Flow
investors looking to put their investment decisions in perspective. Data used to FFO - Funds From Operations
assist in determining the STARS ranking may be the result of the analyst's own FY - Fiscal Year
models as well as internal proprietary models resulting from dynamic data P/E - Price/Earnings
inputs. P/NAV - Price to Net Asset Value
PEG Ratio - P/E-to-Growth Ratio
S&P Global Market Intelligence's Quality Ranking PV - Present Value
(also known as S&P Capital IQ Earnings & Dividend Rankings) - Growth and R&D - Research & Development
S&P Capital IQ Earnings & Dividend Rankings stability of earnings and dividends ROCE - Return on Capital Employed
are deemed key elements in establishing S&P Global Market Intelligence's ROE Return on Equity
earnings and dividend rankings for common stocks, which are designed to ROI - Return on Investment
capsulize the nature of this record in a single symbol. It should be noted, ROIC - Return on Invested Capital
however, that the process also takes into consideration certain adjustments ROA - Return on Assets
and modifications deemed desirable in establishing such rankings. The final SG&A - Selling, General & Administrative Expenses
score for each stock is measured against a scoring matrix determined by SOTP - Sum-of-The-Parts
analysis of the scores of a large and representative sample of stocks. The range WACC - Weighted Average Cost of Capital
of scores in the array of this sample has been aligned with the following ladder
of rankings: Dividends on American Depository Receipts (ADRs) and American Depository
Shares (ADSs) are net of taxes (paid in the country of origin).
A+ Highest B Below Average
Qualitative Risk Assessment
A High B- Lower
A Above C Lowest
Reflects an equity analyst's view of a given company's operational risk, or the
risk of a firm's ability to continue as an ongoing concern. The Qualitative Risk
B+ Average D In Reorganization
Assessment is a relative ranking to the U.S. STARS universe, and should be
NC Not Ranked reflective of risk factors related to a company's operations, as opposed to risk
and volatility measures associated with share prices. For an ETF this reflects on
EPS Estimates a capitalization-weighted basis, the average qualitative risk assessment
CFRA's earnings per share (EPS) estimates reflect analyst projections of future assigned to holdings of the fund.
EPS from continuing operations, and generally exclude various items that are
viewed as special, non-recurring, or extraordinary. Also, EPS estimates reflect STARS Ranking system and definition:
either forecasts of equity analysts; or, the consensus (average) EPS estimate, ««««« 5-STARS (Strong Buy):
which are independently compiled by S&P Global Market Intelligence, a data Total return is expected to outperform the total return of a relevant benchmark,
provider to CFRA. Among the items typically excluded from EPS estimates are by a notable margin over the coming 12 months, with shares rising in price on
asset sale gains; impairment, restructuring or merger-related charges; legal an absolute basis.
and insurance settlements; in process research and development expenses; ««««« 4-STARS (Buy):
gains or losses on the extinguishment of debt; the cumulative effect of Total return is expected to outperform the total return of a relevant benchmark
accounting changes; and earnings related to operations that have been over the coming 12 months.
classified by the company as discontinued. The inclusion of some items, such
as stock option expense and recurring types of other charges, may vary, and ««««« 3-STARS (Hold):
depend on such factors as industry practice, analyst judgment, and the extent Total return is expected to closely approximate the total return of a relevant
to which some types of data is disclosed by companies. benchmark over the coming 12 months.
««««« 2-STARS (Sell):
12-Month Target Price Total return is expected to underperform the total return of a relevant
The equity analyst's projection of the market price a given security will benchmark over the coming 12 months.
command 12 months hence, based on a combination of intrinsic, relative, and
««««« 1-STAR (Strong Sell):
private market valuation metrics.
Total return is expected to underperform the total return of a relevant
benchmark by a notable margin over the coming 12 months, with shares falling
in price on an absolute basis.
Relevant benchmarks:
In North America, the relevant benchmark is the S&P 500 Index, in Europe and
in Asia, the relevant benchmarks are the MSCI AC Europe Index and the MSCI AC
Asia Pacific Index, respectively.

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Stock Report | July 19, 2024 | NYSESymbol: TSM
Taiwan Semiconductor Manufacturing Company Limited
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Stock Report | July 19, 2024 | NYSESymbol: TSM
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