To The Moon

$Taiwan Semiconductor Manufacturing(TSM)$ has just released the Q1 2022 financial report, and its performance is quite solid:

• Revenue: $17.57 billion, a y-o-y growth rate of 36%, exceeds market expectations and breaking the 17.2 billion ceiling given by the company, with;
• Gross Profit Margin: Hit 55.6%, a record high, driving the net profit margin to 41.3%, the best in history!
• Revenue Guidelines for Q2 2022: Target at $17.6-18.2 billion, exceeds Wall Street expectations;

At the Earnings conference, the management raised the revenue growth guidelines for 2022, believing that TSM could exceed the previous medium and high-end range of 20%.

As a manufacturing industry, TSM achieved a net profit rate of 41% with a gross profit margin of 55%, which can be awarded the Crown of the semiconductor industry!

Under the optimistic expectation, the P / E ratio of TSM's 2022 profit may be close to 18x, which is the lowest among the semiconductor leaders such as NVIDIA, AMD and ASML!

In particularly i would mention that:

Regarding of revenue in the first quarter in 2022, it is generally a clear card, mainly because TSM did announce revenue every month.

Therefore, Q1 revenue of $17.57 billion information is neutral to the market. Although it exceeds market expectations, it has been reflected in the stock price already.

Nevertheless, from the perspective of revenue growth trend, TSM's performance is still quite bright.

According to the revenue guidelines for the second quarter, it is expected to be reach $17.6 billion and $18.2 billion. According to previous transcripts, TSM's final performance can fall at the top of the range, or even slightly exceed expectations.

Therefore, the revenue growth rate of 36% may be maintained until the second quarter.

Such achievements are excellent for a capital heavy manufacturing company among the industry!

In terms of profitability, benefiting from the price increase and cost optimization, the gross profit margin in the first quarter reached 55.6%, the best in history, and the gross profit margin guidance in the second quarter was 56% - 58%, or continued to reach a record high!

Due to the reduction of vaccine donation expenses, the operating expense rate in the first quarter fell to 9.9%, significantly lower than 10.8% in the same period last year, pushing the operating profit margin to 45.6%, thus stimulating the net interest rate to 41.3%.

For a manufacturing agent factory, the net interest rate of more than 40% is unimaginable, but TSM did it!

In terms of TSM's development process, at the beginning of its establishment, technology came from transfer, and then it took more than a decade to catch up with Intel and Samsung, so as to surpass its rivals in the 7-nm era and establish its position as the king in the 5-nm era.

For the third quarter of this year, $(TSM)$'s power output will be 3 nm, and its leading technology strength continued to be consolidated.

For chip OEM, the more advanced the manufacturing process is, the more excess profits can be earned. In the 3-nm era, the only competitor to $(TSM)$ is Samsung. Considering the performance in the 5-nm era, $(TSM)$ will earn another excess profit.

The contribution of nano technology remained at a high level of 5%+ in the first quarter of this year.

Judging from the mass production of 5nm, once the mass production of 3nm is completed, or the volume can be increased rapidly, it is expected that $Apple(AAPL)$ will lock in the production capacity. For apple, which is not poor in money, $(TSM)$ will make a lot of money.

Therefore, at the telephone meeting, the management said that even if the economy goes down, $(TSM)$ will not reduce its price.

That is cool~

From the perspective of platform revenue division, the revenue of each platform increased positively in the first quarter:

The management predicts that HPC (High Performance Computing) will become the platform with the strongest growth in the next few years.

In the era of intelligence, the demand for chips is becoming more and more important. In the past, the cycle of the semiconductor industry was mainly brought about by the changes in the demand for computers and mobile phones. However, with the development of industries such as autonomous driving and high-performance computing, the cycle attribute of semiconductors has been weakened, especially $(TSM)$, which takes the lead with advanced technology. In terms of annual income, the cycle attribute has been greatly weakened.

From the above figure, in 2009 and 2011, during the global economic downturn, $(TSM)$'s revenue showed negative growth, but in 2018, $(TSM)$'s revenue growth slowed to only 2%, without negative growth.

As a result, TSM's valuation method is changing to price earnings ratio, rather than the traditional price to book ratio (PB) valuation method of cyclical stocks.

According to the current situation, TSM's profit is expected to reach US $28.8 billion in 2022. If so, the P / E ratio is only 18 times, which is far lower than that of $NVIDIA Corp(NVDA)$, $AMD(AMD)$ and $ASML Holding NV(ASML)$.

Such a valuation level is not too expensive in recent history:

At present, the market is worried about the decline in semiconductor demand in the second half of the year. For example, the management said at the telephone conference that the demand for computers and mobile phones has slowed down.

However, after the 3-nm mass production, TSM's advanced technology accounts for too much, the production capacity is still tight, the industry headwind may have little impact on TSM's performance.

Perhaps worried about the state of the industry, TSM will maintain its capital expenditure unchanged this year.

Generally speaking, the title of the king of TSM OEM is becoming stronger and stronger!$Taiwan Semiconductor Manufacturing(TSM)$