After rising 12 times in a year and a half, foreign capital began to withdraw from South Korea's "demon stock" Hanmi Semiconductor

Can the terrifying surge, scarier than NVIDIA, continue as foreign investors are discouraged by the high stock price?

Since the end of 2022, the "demon stock" Hanmi Semiconductor in South Korea has soared by nearly 1200%, attracting numerous investors to join the frenzy.

So far this year, Hanmi Semiconductor's stock price has doubled, becoming the best-performing stock in the MSCI Asia Pacific Index. However, at the same time, foreign investors who previously bought heavily have started to withdraw. Data shows that the foreign ownership ratio has dropped from 16.5% in mid-February to 13.2%.

The reason lies in the excessively high valuation. Currently, Hanmi Semiconductor is the most highly valued stock among Asian chip stocks, with an expected P/E ratio of 80 times next year, higher than all other stocks under the FactSet Asia Semiconductor Index.

Ahn Hyunsang, CEO of the Korea Investment Research Institute, commented:

"From the P/E ratio perspective, the stock is very expensive, so I am not sure if this rebound can be supported further."

Yoon Joonwon, fund manager at DS Asset Management, stated:

"Those who bought out of ignorance have already left, and some remaining investors are also considering exiting."

"Foreign investors may still see a reduced potential in the stock, while domestic funds seem to be 'hesitating to persist'."

Joonwon pointed out that going forward, Hanmi Semiconductor needs to achieve at least 1 trillion Korean won (approximately $73 billion) in net profit this year to make the valuation relatively reasonable.

For reference, Hanmi Semiconductor's financial data shows that the company's net profit for 2023 is only 267 billion Korean won.

However, the company's performance last year was affected by the global semiconductor market downturn, and the company expects a "strong recovery" in 2024, with potential upside from booked orders.

According to Morgan Stanley analyst Jay Kwon's research report, the company also expects that its main product's thermal compression bonding technology will become the "mainstream" for future AI memory manufacturers.

Why the Explosive Surge?

How terrifying is the surge really? In a straightforward comparison, Hanmi Semiconductor's performance in the past year has far outpaced NVIDIA and SK Hynix.

This is mainly driven by the wave of demand for AI chips. As an upstream memory manufacturer for AI chips, Hanmi's thermal compression bonding equipment is mainly supplied to SK Hynix for the production of HBM (High Bandwidth Memory), which will eventually be shipped to downstream manufacturers like NVIDIAInformation shows that the Dual TC Bonder is an essential equipment in the HBM production process. Hanmi Semiconductor's TC Bonder is a device used for vertical stacking and connecting semiconductor chips made using Through Silicon Via (TSV) technology. The term TC Bonder is used because it implements the thermocompression bonding method.

Another significant reason is that Kwak Dong Shin, the CEO of Hanmi Semiconductor, has increased his holdings multiple times in the past year, currently holding nearly 36% of the company's shares, worth about $3.7 billion, continuously instilling confidence in the market.

Furthermore, there are media reports suggesting that Hanmi Semiconductor is expected to be included in the Korean blue-chip stock index Kospi200 in June this year, which has also boosted the stock price to some extent