Major Bank Ratings | CLSA: Raises TSMC target price to 3,030 NTD, expects earnings to benefit from improved pricing and higher gross margins

Glonghui, January 28｜CLSA released a report stating that TSMC's capital expenditure guidance of $52 billion to $56 billion this year is surprising. The bank believes the most likely reason is that the proportion of new plant construction in the expansion expenditure is higher than market expectations, resulting in per-node expenditure being at the upper end of the empirically estimated range. However, the amount of unfinished projects remains high, reflecting a slower-than-expected capacity ramp-up, while basic infrastructure spending on land and plant construction is also accelerating. The bank expects no significant changes in supply-demand balance over the next two years. The bank believes that TSMC's pricing improvement and gross margin enhancement will lead to an upward revision of its earnings per share forecast for this year and next by 14% and 19%, respectively, and the target P/E ratio is moving closer to Nvidia. The target price has been raised from NT$2,000 to NT$3,030.