Morgan Stanley: The impact of the New Taiwan Dollar appreciation is limited, maintaining an "Overweight" rating on Taiwan Semiconductor
Morgan Stanley stated that the recent appreciation of the New Taiwan Dollar has a limited negative impact on Taiwan Semiconductor, maintaining an "Overweight" rating with a target price of NT$ 1,288. Although the appreciation of the New Taiwan Dollar may lead to a decline in Taiwan Semiconductor's gross margin and earnings per share, Morgan Stanley believes this will not harm the company's profitability and points out that some adverse factors are being eliminated, which may drive the expansion of Taiwan Semiconductor's price-to-earnings ratio
According to the Zhitong Finance APP, Morgan Stanley released a research report stating that the recent significant appreciation of the New Taiwan Dollar may have limited negative impact on Taiwan Semiconductor (TSM.US). They maintain an "Overweight" rating with a target price of NT$1,288.
Morgan Stanley pointed out that since most of Taiwan Semiconductor's costs are denominated in New Taiwan Dollars, including depreciation, employee salaries in Taiwan, and electricity costs, for every 1% appreciation of the USD against the New Taiwan Dollar, Taiwan Semiconductor's gross margin is expected to decline by 0.4 percentage points, and the operating profit margin will be affected by approximately 0.4-0.5 percentage points, with a potential 2% downside risk to earnings per share (EPS). If the USD appreciates by 5% against the New Taiwan Dollar, EPS could face a 10% downside risk. Previously, the USD against the New Taiwan Dollar briefly surpassed the 30 mark, exceeding Taiwan Semiconductor's revenue expectations of 32.5 for the second quarter of 2025.
Nevertheless, Morgan Stanley is not overly concerned about the impact of exchange rates on Taiwan Semiconductor's profitability, as they believe it will not undermine the company's structural profitability. Furthermore, they noted that some adverse factors affecting stock prices are being eliminated.
It is worth noting that some funds flowing into the New Taiwan Dollar, if they enter the local stock market, could drive an expansion in Taiwan Semiconductor's price-to-earnings ratio. Currently, Taiwan Semiconductor's expected price-to-earnings ratio for 2026 is 12.6 times, with a dividend yield of 2.7%, making it quite attractive and likely to attract capital inflows
