Morgan Stanley: Raises Taiwan Semiconductor's target price to NTD 1280, reiterates "Overweight" rating as top pick in the industry

Morgan Stanley's research report pointed out that Taiwan Semiconductor is expanding its capacity for 2-nanometer and 3-nanometer chips and CoWos advanced packaging at a rapid pace to meet the strong demand for artificial intelligence semiconductors. The company is expected to increase its capital expenditure forecast for next year from USD 35 billion to USD 38 billion, with CoWos monthly capacity expected to increase to 80,000 units next year. Morgan Stanley mentioned that although the company has not provided formal guidance, management mentioned at a recent brokerage conference that the company may be able to sustain a compound annual growth rate of revenue between 15% and 20% directionally over the next 5 years. They believe that this committed long-term growth, coupled with gross margin expansion, makes the company more attractive in valuation compared to other Asian semiconductor companies. The bank raised the group's earnings per share forecast for next year and 2026 by 4% and 5% respectively, raising the target price from NTD 1,220 to NTD 1,280, reiterating an "overweight" rating as the top pick in the industry, optimistic about the company's quality and defensive nature in the extended semiconductor downturn cycle