TSMC reported an unexpectedly strong November, per a press release today which stated:
TSMC today announced its net revenue for November 2022: On a consolidated basis, revenue for November 2022 was approximately NT$222.71 billion, an increase of 5.9 percent from October 2022 and an increase of 50.2 percent from November 2021. Revenue for January through November 2022 totaled NT$2,071.33 billion, an increase of 44.6 percent compared to the same period in 2021.
This has been on the top of our list in portfolio meetings for some time and this press release may mark an impetus to enter the stock. We will have a deep dive in the next 1-2 weeks. Royston covered the earnings report on the forum in October here.
Previous posts by Royston can be found here:
TSMC CONTINUES WITH STRONG RESULTS
TSMC preannounced its Q3 2022 results on Oct 13. The company’s leadership position in advanced nodes has helped the company to continue to deliver strong results in a current tough macro environment.
Revenue growth was strong as it grew by 36% YoY and 11% QoQ to $20.23 billion.
The company’s gross margin improved to 60.4% compared to 59.1% in Q2 2022 and 51.3% in the same period last year.
This was higher than the management guidance of 57.5% to 59.5% as the company benefitted from favorable foreign exchange and cost improvements.
The operating margin was also strong as it came at 50.6% compared to 49.1% in Q2 2022 and 41.2% in the same period last year. It was higher than the management guidance of 47% to 49%.
The company’s net profit grew by 80% YoY to NT$280.87 billion (US$9.26 billion) with a net profit margin of 45.8% compared to 44.4% in Q2 2022 and 37.7% in Q3 2021.
EPS was NT$10.83 compared to NT$6.03 in Q3 2021. EPADR (Earnings per American Depository Receipt) is $1.79, beating estimates by $0.11.
The company had a free cash flow of NT$146.73 billion (US$4.84 billion) with an excellent free cash flow margin is 24%.
The average exchange rate used is $1= 30.32 Taiwan Dollars
The key trends from the earnings call:
The company has reduced the Capex for 2022 to $36 billion from last quarter’s guide to being at the lower end of the previous guidance of $40 billion to $44 billion range. The CFO said in the earnings call, “About half of the change is due to capacity optimization based on the current medium term outlook. And the other half is still to continue to delivery challenges.”
The company’s CEO, C.C.Wei, said, “On the demand side, we continue to observe softness in consumer end market segment. Other end market segments such as data center and automotive related remain steady for now for TSMC. But we start to see the possibility of adjustment unrolled.”On the demand side, we continue to observe softness in consumer end market segment. Other end market segments such as data center and automotive related remain steady for now for TSMC. But we start to see the possibility of adjustment unrolled.”
He further gave more information when an analyst asked the outlook down the road.
“Of course, we say that so far, our customers give us their demand forecast — so the data center and automotive related are still steady. But now the market becomes solved and will take a more conservative way in our planning for 2023. And that's why we say that we don't rule out the possibility. They might have some correction also, but we did not see it right now, to be frank with you.They might have some correction also, but we did not see it right now, to be frank with you.
And for the inventory correction in 2023, all we want to say is like that. We expect probably 2023, the semiconductor industry were likely to decline. But TSMC also is not immune, we believe our technology position, strong portfolio in HPC and longer-term strategic relationship with customers will enable our business to be more resilient than the overall semiconductor industry. And that's why we say in 2023 still a growth year for TSMC and the overall industry probably will decline.”we believe our technology position, strong portfolio in HPC and longer-term strategic relationship with customers will enable our business to be more resilient than the overall semiconductor industry. And that's why we say in 2023 still a growth year for TSMC and the overall industry probably will decline.”
Guidance:
The company expects Q4 2022 revenue to be $20.3 billion at the mid-point of the guidance, representing a YoY growth of 29%. Gross profit margin is expected to be in the range of 59.5% to 61.5% and operating profit margin is expected to be in the range of 49% to 51%.
Below are the consensus revenue estimates for the next few quarters.
Source: Seeking Alpha
The company has reiterated the long-term guidance. “We expect strong demand for our leading node technologies, driven by both smartphone and HPC applications to fuel our long-term revenue growth of 15% to 20% CAGR over the next several years in U.S. dollar terms.