The Zhitong Finance App learned that TSM.US (TSM.US) announced results that exceeded expectations, but Susquehanna analyst Mehdi Hosseini predicted that the company's compound annual earnings per share growth rate would decline in the future due to accelerated depreciation expenses and rising operating expenses. Therefore, even though the analyst raised its target price from 83 US dollars to 85 US dollars, the “sell” rating was still repeated.
Financial reports show that TSMC's revenue for the first fiscal quarter increased 25.4% year on year to US$12.9 billion, higher than market expectations of US$12.8 billion; earnings per share after dilution were US$0.96, exceeding market expectations of US$0.92.
Wendell Huang, vice president and chief financial officer of TSMC, said, “Our business in the first quarter was supported by demand related to HPC chips. However, compared to recent years, seasonal demand for smartphones is relatively moderate. Entering the second quarter of 2021, we expect the company's revenue to remain flat as demand related to HPC chips will continue to grow, but will be offset by seasonal smartphone factors.”
In terms of other data, the company had a Q1 gross margin of 52.4% and a net profit margin of 38.6%. TSMC said that the 5 nm process accounts for 14% of the company's total wafer revenue, while 7 nm accounts for 35%. Overall, advanced manufacturing processes accounted for 49% of total wafer revenue for the whole quarter.
Additionally, TSMC also provided its performance guidance for the second quarter of FY2021. Based on the exchange rate of $1 to NT$28.4, the company estimates that Q2 revenue will be between US$12.9 billion and US$13.2 billion; gross margin is expected to be between 49.5% and 51.5%, and operating profit margin is between 38.5% and 40.5%; and it expects to generate about US$30 billion in capital expenditure for the full year of FY2021.
In response, Hosseini stated in the report: “After TSMC announced its FY2021 Q1 results, we are updating our expectations for the company. Although the company's 3-year capital expenditure is expected to be $100 billion, which is expected to help drive a CAGR of 10-15% in 2020-2025, we anticipate that the accelerated increase in depreciation expenses and the increase in operating expenses will lead to a decline in the company's CAGR per share.”
Overall, Wall Street is on the sidelines of the stock. Out of 4 analysts, 1 gave it a “buy” rating, 2 gave it a “hold” rating, and 1 gave it a “sell” rating. The average target price is $83, with 29% downside from the current level.
