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United Microelectronics Corporation
UMC-N
BUY
Sep 29, 2023
$7.060
Stock price when the opinion was issued
Technology
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Stockchase Research Editor: Michael O'Reilly The semiconductor space saw global chip sales up over 14% last year and there is now a global shortage of supply. UMC is a Taiwan based chip producer and recently released sales were up 14%. It has beat earnings estimates in each of the past three reporting cycles. It trades at 31x earnings, cheap compared to its peers at 68x. It also pays a small dividend. We would buy this with a stop loss at $7, looking achieve $11.50 -- upside potential over 20%. Yield 1.56% (Analysts’ price target is $11.55)
Technology
UMC is a Taiwanese company, operating as a semiconductor wafer foundry, and is now trading at 11x times' Forward P/E. In the last five years, sales grew around 10% on average, mostly organic growth. The balance sheet is strong, with a net cash of Taiwan NT115B(or around $3.7B). The company has been reinvesting heavily to pursue organic growth, while dividends also grew at an impressive pace over the last few years. However, the semiconductor industry is quite cyclical. Based on consensus estimates, sales are expected to decline by 24% in FY 2023, and then recover to around 12%-15% over the next few years. Overall, solid company, cheap valuation, strong balance sheet, and we like the name. Keep in mind we do not follow international names closely, however.
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