Taiwan Semiconductor Manufacturing — Initiation of Coverage
Published · Dilikoglu Research
- Company / ticker
- Taiwan Semiconductor Manufacturing / TSM
- Recommendation
- HOLD · High risk
- Price target
- $405 USD per ADR · 12–18 months
- Reference price
- $406.13
- Reference date
- 2026-10-30
- Implied upside to target
- -0.3%
Base intrinsic value of $406.28 per ADR, rounded to the nearest $5. Probability-weighted value is $376.77. The target excludes dividends and is not a guaranteed return. Dated reference, not a live quote.
Executive summary
We initiate TSMC with HOLD · High risk and a $405 target per ADR, 0.3% below the October 30 close of $406.13. Technology leadership supports substantial growth, but the reference price already reflects much of our Base outcome.
Key investment thesis
- Reported Q3 results and Q4 guidance anchor the near-term forecast; subsequent growth and platform mix are DR estimates.
- Base growth normalizes by FY32, with explicit capital investment and a transition to terminal reinvestment.
- Manufacturing leadership must translate into cash returns after fab investment, working capital and financial claims.
Target and rating methodology
BUY above +15% target return; SELL below -15%; otherwise HOLD. Target rounds Base to nearest $5; dividends excluded.
Scenario valuation at publication
Model effective 2026-11-01. Frozen publication snapshot; USD per share. Subsequent model updates appear on the Coverage page.
| Scenario | Probability | Fair value |
|---|---|---|
| Failure | 10% | $41.14 |
| Bear | 25% | $177.79 |
| Base | 45% | $406.28 |
| Bull | 20% | $726.90 |
Probability-weighted fair value: $376.77. This is separate from the report target.
Key operating assumptions
- FY27 Base revenue
- $227.97bn; DR estimate
- FY27 / terminal operating margin
- 57% / 50%; DR estimates
- Valuation
- 9.5% WACC, 3.5% terminal growth, 24% terminal ROIC; DR estimates
Primary catalysts
- Monthly revenue and advanced-node and packaging delivery.
- The next annual capital budget and evidence of cash conversion.
Principal risks and thesis breakers
- Growth normalization, overseas costs, customer concentration and technology competition.
- Taiwan exposure, terminal-value dependence and estimated detailed liability components.
Persistent delivery shortfalls, margin erosion beyond the modeled fade, or investment growth without corresponding cash returns.
Current evidence review and open items →Report-specific conflicts disclosure
Tugay Dilikoğlu reports no TSMC securities holdings, other material interest in TSMC, or compensation from TSMC or any third party for this research.