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June 23, 2017

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Foreign brokerages raise target for TSMC shares

TAIPEI, Taiwan -- TSeveral foreign brokerages have raised target prices for shares of Taiwan Semiconductor Manufacturing Co. (TSMC) after the world's largest contract chip-maker gave better-than expected sales guidance for the second quarter.

The upgrades also came after TSMC reported unexpectedly high net profit for the first quarter driven by strong demand for its advanced technology process.

In addition to the good results and strong forecast, JP Morgan Chase said it has also been pleased by the chip-maker's estimate that demand for its 20 nanometer process will remain solid.

JP Morgan has raised its target price for shares of TSMC to NT$150 from NT$140, while leaving its "overweight" recommendation on the stock unchanged.

Shares of TSMC closed up 2.50 percent at the day's high of NT$123.00 Friday on the Taiwan Stock Exchange on positive leads the chip-maker came up with in an investors' conference held a day earlier.

TSMC has anticipated its second quarter consolidated sales will rise 21.5-23.5 percent from the first quarter, higher than a market prediction of 14-18 percent. In the first quarter, it posted NT$1.85 in EPS, up from NT$1.73 recorded in the previous quarter.

Goldman Sachs said the first quarter EPS was 4 percent higher than its own earlier estimate. It said as TSMC is expected to launch commercial production of the 16nm process in the second quarter of next year, the chip-maker could secure more orders from heavyweight clients, such as Apple Inc.

The brokerage said it has raised a target price on TSMC shares to NT$144 from NT$138, while upgrading its forecast of the chip-maker's EPS by 4-8.6 percent to NT$8.71, NT$10.37 and NT$11.64 in 2014, 2015 and 2016, respectively.

In 2013, TSMC's EPS stood at NT$7.26.

Holding a similar upbeat mood, Bank of America Merrill Lynch said it has raised TWSE's EPS for 2014 and 2015 by 7 percent and 4 percent, respectively, to NT$9.47 and NT$10.74. The brokerage has also upgraded its target price for TSMC shares to NT$145 from NT$135.

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