Daily Brief Equity Bottom-Up: TSMC Q324 Earnings Key Takeaways and more

• Q424 revenue forecast of $26.5 billion, up 13% QoQ and the highest Q3 to Q4 revenue jump since Q4 2017
• Demand for AI acceleration is real and just beginning. According to a key customer of theirs, “demand right now is just insane”
• Overseas fabs progressing well with Arizona yielding well and on track for high volume production in early 2025

• TSMC Delivers Strong 3Q24 Revenue and Margin Growth; Margin Guidance Climbs
• Management Says Believes AI Demand is Not Hyped… Companies Extracting ROIs
• TSMC – Structural Long Rating Maintained; NT$1,515 Price Target Suggests 46% Upside

• Main positive surprise in 3Q24 is a sharp margins expansion, reflecting Utilization increase. OP 9% above Consensus.
• Main positive surprise in 4Q24 guidance: high QoQ revenue growth at 13%, which suggests further Utilization increase and TSMC could beat its margins guidance again.  
• Net Income growth is accelerating in 2H24 to ~55% YoY. The stock is not that expensive, we estimate trading at 17.2x 2025 and 13.8x 2026 EPS.

• 4Q24 Guidance: Sales will be US$26.1-26.9bn, up 13%; GM outlook will be 57-59%; and OPM outlook is 46.5-48.5%
• AI revenue contribution will triple and reach mid-teens sales contribution this year. Almost every AI innovator cooperates with TSMC.
• APT will grow above the corporate average in the next five years.GM is approaching the corporate average, but it’s not the same currently.

• Pilbara Minerals announced the establishment of a $1 billion debt facility with a banking syndicate.
• The company plans to use the facility to repay existing concessional debt and potentially make acquisitions.
• The new facility offers more flexibility in terms of leverage ratios compared to existing debt agreements.

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• CoWoS packaging meets global demand for advanced technology, with efficient design for integration.
• Taiwan reveals breakthrough in tiny quantum computer technology, impacting the tech industry.
• LGES secures multi-billion deal with Mercedes-Benz for EV batteries, boosting electric vehicle industry.

• In FY02/24, revenue was JPY48.8bn (+27.8% YoY), operating profit was JPY4.6bn (+653.2% YoY), recurring profit was JPY4.8bn (+92.5% YoY), and net income was JPY3.2bn (+112.8% YoY).
• The company attributed YoY revenue growth to the following factors.
• First, customer count continued to grow after the March 2023 price hike.

• Shell expects Q3 refining margins to drop 28.6% QoQ to USD 5.5/bbl, driven by a sharp decline in oil prices. However, improved chemical margins are anticipated to offer some relief.
• Between 2023 and 2025, Shell plans to invest USD 10 billion to USD 15 billion in low-carbon solutions globally, with a strategic emphasis on LNG.
• Shell projects LNG to account for 26% of energy sales by 2030, up from 22% in 2023, while oil products will decrease from 48% to 39%.

• The company required a $180 billion bailout from the US government during the financial crisis, but has since fully repaid it with interest.
• Under Peter Zafino’s leadership, AIG has refocused its underwriting efforts, returning to profitability and divesting non-core businesses.
• AIG has undergone a remarkable turnaround post-financial crisis, focusing on specialty insurance for top quartile industry returns

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• TotalEnergies’ revenue is expected to fall 9.1% QoQ and 17.8% YoY in Q3, while its EPS is expected to rise 6.6% QoQ but fall 19.8% YoY. 
• TotalEnergies anticipates a decline in downstream profitability due to a 65.7% QoQ drop in European refining margins, though increased gas prices are expected to partially offset lower oil prices.
• TotalEnergies raised its annual oil and gas output growth forecast to 3% through 2030. Targets natural gas to comprise 50% of its total sales mix by 2030.