Citi has issued a research report expressing continued optimism for China's PCB equipment sector. The bank believes that the allocation of capacity towards AI-related PCBs is creating a crowding-out effect on non-AI segments. Furthermore, the ongoing push by Chinese PCB manufacturers into higher-end products is seen as a source of potential upside.
Within the sector, Citi's top preference is for Han's Laser Technology Industry Group Co., Ltd. (SZSE: 002008), followed by the H-shares of HANS CNC (HKEX: 03200), and then its A-shares Shenzhen Han'S Cnc Technology Co.,Ltd. (SZSE: 301200). The bank cites Han's Laser's diversified growth drivers, while noting that the H-shares of HANS CNC trade at a discount of over 50% compared to its A-shares.
Citi currently assigns a "Buy" rating to HANS CNC H-shares with a target price of HK$325.
The report highlights that if Taiwan's Taiwan Takisawa Technology Co., Ltd. (TWSE: 3167), a key competitor to HANS CNC in the mechanical drilling equipment market, were to dedicate all its capacity to AI-related products, its monthly output could potentially drop from 300 to 200 units. Similarly, if HANS CNC fully allocated its capacity to AI products, its drilling equipment output would also shrink by one-third. Citi anticipates that this capacity squeeze will lead HANS CNC to prioritize non-AI customers who offer higher profit margins.
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