Since late 2022, Hanmi Semiconductor Co’s share price has skyrocketed by nearly 1,200%, causing some investors to reconsider their positions amid soaring valuations. The South Korean firm’s AI-related chipmaking equipment has driven this growth, making Hanmi the most expensive stock among its regional peers based on forward earnings estimates.
Valuation and Investor Sentiment
Foreign investors, who heavily invested last year, are now reducing their holdings. Foreign ownership has decreased from 16.5% in mid-February to 13.2%. “People who bought out of ignorance have left, and now some investors are having second thoughts,” said Yoon Joonwon, a fund manager at DS Asset Management Co. While foreign investors remain cautious, local funds are holding steady despite some doubts.
Driving Factors
Hanmi’s stock has more than doubled in 2024, largely due to the excitement over its thermal compression bonders used by companies like SK Hynix and Micron Technology. CEO Kwak Dong Shin, holding nearly 36% of the company valued at $3.7 billion, continues to purchase shares, further boosting investor confidence. Additionally, expectations of Hanmi’s inclusion in the Kospi 200 Index in June have positively influenced the stock.
Analyst Perspectives
Despite the optimism, analysts express concerns about the high price-to-earnings ratio. “The stock is very expensive based on the price-to-earnings ratio, so I’m not sure if there are any more legs to this rally,” said Ahn Hyunsang, CEO of Korea Investment Research Institute. DS Asset’s Yoon suggests Hanmi would need to achieve an annual net income of 1 trillion won ($730 billion) to justify its current valuation, compared to the 267 billion won reported in 2023.
Future Outlook
JPMorgan analyst Jay Kwon notes that although Hanmi’s results were weak last year, the company projects a strong recovery in 2024, driven by its superior technology in thermal compression, which is expected to become mainstream among AI memory makers.
Market Reaction
Despite positive projections, some investors are taking profits. Hanmi’s stock closed 0.6% lower after an earlier rise, following Nvidia’s upbeat forecast and South Korea’s $19 billion incentive package for the chip sector.
Conclusion
Hanmi Semiconductor’s dramatic rise highlights the delicate balance between investor enthusiasm and market fundamentals. While future growth prospects are promising, the current high valuations necessitate significant earnings improvement to sustain the momentum, making the stock’s future trajectory uncertain.
