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U.S. brokerage maintains 'buy' on TSMC after sales report

2018/12/11 19:17:51

Taipei, Dec. 11 (CNA) A U.S.-based brokerage said Tuesday that it has left a "buy" recommendation unchanged on shares of contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), even though the company reported a roughly 3 percent month-on-month drop in sales for November.

On Monday, TSMC reported that it posted NT$98.39 billion (US$3.18 billion) in consolidated sales for November, down 3.1 percent from a month earlier, with market analysts attributing the decline to the slow-season effect.

Despite the fall, the November sales were still the third-highest monthly level in TSMC's history, behind NT$103.70 billion reported for March and NT$101.55 billion in October.

In a research note, the American securities house said that based on TSMC's aggregate sales of about NT$199.9 billion for October and November, the chipmaker is expected to see few difficulties in achieving its sales target of between NT$288 billion and NT$291 billion for the fourth quarter.

Meanwhile, the brokerage said it has lowered a forecast for TSMC's gross margin -- which reflects the difference between revenue and cost of goods sold -- to 46.5 percent from a previous estimate of 47.3 percent for the first quarter of next year, since the costly advanced 7-nanometer process will weigh more in the company's product mix.

In addition, weakening demand for certain graphics chips could affect shipments of TSMC's 12nm process in the January-March period, the securities house said.

The brokerage said it has cut a target price on TSMC shares to NT$270 from NT$280.

TSMC, the most heavily weighted stock in the local market, serves as a defensive stock at a time of a volatile market amid continued trade tension between the U.S. and China so the brokerage urged investors to pick up TSMC shares as a safe haven.

On Tuesday, TSMC shares staged a technical rebound to close up 1.60 percent at NT$222.50 on the Taiwan Stock Exchange, serving as a driver to an upturn of the benchmark weighted index, which ended up 0.62 percent at 9,707.04 points.

(By Jeffrey Wu and Frances Huang)