TSMC Valuation Analysis & DCF Forecast (ADR Basis)
- 오리 오리
- Sep 14
- 3 min read
Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is the backbone of the global semiconductor supply chain. As investors anticipate a multi-year upcycle in advanced logic and AI-related chips, the stock has rallied sharply.
To cut through the hype, we built a fully-parameterized Google Sheets model combining relative valuation with a five-year discounted cash flow (DCF) forecast. This post summarizes our base-case assumptions, free-cash-flow build-up, and resulting intrinsic value estimates on both a common-share and ADR basis.
1. Key Assumptions
Operating forecast: We model revenue growth decelerating from 30% in Year 1 to 8% in Year 5 as the post-AI surge normalizes. EBIT margins expand modestly from 45% to 48% on scale efficiencies.
2. Free Cash Flow Forecast
Under these assumptions, free cash flow grows from about USD 23 B in Year 1 to USD 43 B in Year 5. We discount these cash flows at a WACC of ~9.0% and apply a 3% terminal growth rate.
3. DCF Results (Base Case)
We discount each year’s FCF at a WACC of ~9.0%, derived from our cost-of-equity and after-tax cost-of-debt inputs.
We then apply a 3% terminal growth rate to Year 5 FCF to compute the terminal value.
Per-share values:
Implied Price per Common Share: ~USD 34.5
Implied Price per ADR (5 common shares): ~USD 172.5
Because each NYSE-listed TSM ADR represents five underlying common shares, ADR fair value is simply 5× the common-share fair value.
4. Relative Valuation
Current ADR Price: USD 259.3
EPS (TTM): USD 8.78
Industry P/E: 30x
TSMC ADR P/E: 29.5x
Despite strong fundamentals, our base-case DCF suggests the stock trades well above intrinsic value on an ADR basis (~USD 259 vs. USD 172 implied).
5. Sensitivity Analysis
We stress-tested our model across different combinations of discount rates and terminal growth:
Lowering WACC to 7% or assuming 5% terminal growth pushes ADR fair value above USD 220.
Raising WACC to 9% or using 2% growth pulls ADR fair value closer to USD 150.
This range—USD 150–220 ADR—frames the plausible outcomes under reasonable variations of our assumptions.
6. Investment Takeaways
Base Case: ADR fair value ~USD 172 vs. current ~USD 259 → stock looks expensive.
Upside Case: Faster AI ramp, higher margins, lower discount rate → fair value rises toward USD 220+.
Downside Risks: U.S.–China tensions, export controls, cyclical downturns, currency effects.
We view an attractive entry range as USD 160–180 ADR with a medium-term target of USD 220–240 ADR if the industry recovery accelerates.
7.Conclusion
This model-driven analysis blends market-based multiples with fundamental cash-flow modeling to create an anchor for long-term intrinsic value.While TSMC remains the world’s most critical semiconductor foundry, the current ADR price reflects aggressive assumptions about future growth.Investors should combine this kind of valuation work with ongoing monitoring of earnings releases, capex plans, and macro developments before making decisions.
https://www.ft.com/content/8ffc9ddf-6bee-4a22-a0d6-dcc227d82e14?utm_source=chatgpt.com (AI demand powers Taiwan's TSMC to its highest-ever quarterly profit)
https://www.reuters.com/markets/asia/taiwan-august-exports-beats-forecasts-hit-record-level-despite-tariffs-2025-09-09/?utm_source=chatgpt.com (Taiwan August exports beats forecasts to hit record level despite tariffs)
https://www.reuters.com/technology/tsmc-begins-producing-4-nanometer-chips-arizona-raimondo-says-2025-01-10/?utm_source=chatgpt.com (TSMC begins producing 4-nanometer chips in Arizona)
9.Investment Opinion: Moderate Buy on TSMC (ADR Basis)
Although our base-case DCF model suggests that TSMC’s ADR is currently trading above its intrinsic value (implied ADR price ~USD 172.5 vs. market price ~USD 259), I lean toward a moderate buy recommendation under the following rationale:
Positives:
– 2 nm leadership: TSMC’s yield reportedly ~60% vs. Samsung ~40%, supporting lower costs and stronger customer leverage.
– Demand pipeline: Ongoing growth in AI/HPC chips with anchor customers like Apple, AMD, NVIDIA.
– Yield ramp: N2 defect density already below N3 at the same stage, suggesting faster maturity.
Risks:
– Samsung catch-up: Could narrow the 2 nm yield gap by late 2025, eroding TSMC’s edge.
– Capex & complexity: New nodes require huge spend; delays can pressure margins.
– Valuation: Current ADR price embeds optimistic assumptions; multiple compression is possible.
– U.S. fab execution: Initial yield and efficiency at TSMC’s Arizona plant are reportedly below its Taiwan fabs, which could raise costs and slow ramp-up.
Recommendation:
– Rating: Moderate Buy (cautious accumulation)
– Entry Range: ADR USD 200–220 on pullbacks or confirmed milestones
– Fair Value: ADR ~USD 172–180 base case; upside to USD 220–250 with stronger margins
– Key Risks: Slower yield improvement, competitor pricing, geopolitical shocks
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