Nomura Securities Downgrades Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) to Neutral

Nomura Securities downgraded Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) from Buy to Neutral, saying valuation looks full now with surfacing cyclical concerns. PT to TWD 183 from TWD 174.

Analyst Aaron Jeng commented, "Our only Buy in large-cap Semi this year, TSMC has outperformed TAIEX by 20% / 13% in the past nine months / YTD. We believe the potential share gain into 10/7nm which we highlighted in "Worst behind; improvements ahead; improvements ahead; up to Buy" (Oct, 2015) is the major reason. Semi inventory restocking from late-2015 (still ongoing) has also helped. That said, after such a good run, we downgrade to Neutral, since it is now trading near peak-cycle valuation by using 2017F BVPS (Fig. 8), which might have priced in the positives that we have flagged. Also, we do not rule out the possibility of an inventory correction into 4Q16, after a strong 3Q, on our concerns of overbooking risks in the tech supply chain. Our new TP is TWD183, on a peak-cycle 3x 2017 BVPS, following earnings increases of 6% in 2016-17. Samsung (005930 KS, Buy) may have better risk / reward at this time point thanks to the booming SSD and OLED applications. "

For an analyst ratings summary and ratings history on Taiwan Semiconductor Manufacturing Co. Ltd. click here. For more ratings news on Taiwan Semiconductor Manufacturing Co. Ltd. click here.

Shares of Taiwan Semiconductor Manufacturing Co. Ltd. closed at $26.97 yesterday.

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