Citigroup raises Han's CNC A/H-share target prices, believing AI PCB equipment demand supports long-term growth, with H-shares offering better risk-reward

Overview

This report is a company research update by Citigroup on Han's CNC Technology (03200.HK/301200.SZ), based on discussions with board secretary Zhou Xiaodong on June 9 during Citigroup's research on China's industrial AI infrastructure and robotics. The report focuses on opportunities in AI PCB, 1.6T CPO, SLP, ultrafast laser drilling, mechanical drilling, and high-end IC substrate equipment, and accordingly raises earnings forecasts and A/H-share target prices.

Core views

Citigroup's core view is that Han's CNC will benefit not only from demand for AI PCB equipment, but may also gain incremental opportunities from 1.6T CPO SLP, Nvidia-related midplane/backplane architectures, and penetration into high-end IC substrate equipment. Management expects AI product revenue contribution to rise from about 30% in 2025 to 60% in 2026. However, the A-share mechanical drilling narrative is already largely reflected in the price, so the Neutral rating is maintained; for H-shares, given the significant discount relative to A-shares, Citigroup believes the risk-reward is better and maintains Buy.

Analysis framework

The report mainly uses company management interviews, verification of industry chain orders and delivery constraints, high-frequency peer revenue indicators, relative valuation comparisons between A-shares and H-shares, and valuation based on 2027E target P/E multiples. Citigroup shifted the target price basis from previously using 2026E earnings to 2027E earnings to reflect a stronger long-term demand outlook for PCB equipment.

Methodology notes

• Company researchManagement communication and industry chain verification

  Verify demand for AI PCB equipment through feedback from the board secretary, order conditions, and customer switching behavior.

  The report cites management views indicating that SLP manufacturers shifted to Han's CNC's ultrafast laser drilling equipment due to tight delivery schedules from Mitsubishi Electric, and uses this as evidence of strengthening demand for AI PCB equipment.

• Valuation methods2027E target P/E multiple method

  Calculate A/H-share target prices based on 2027E earnings and target P/E multiples.

  The A-share target price of Rmb290 is based on about 55x 2027E P/E; the H-share target price of HK$252 is based on about 41x 2027E P/E, representing a 25% valuation discount relative to the A-shares.

• Scenario analysisBull/Base/Bear valuation scenarios

  Set re-rating or de-rating multiples based on the strength of demand for AI PCB equipment.

  The A-share base case is about 55x 2027E P/E, bull case about 75x, and bear case about 35x; the H-share base case is about 41x, bull case about 56x, and bear case about 26x.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Han's CNC-H (03200.HK)

  Core covered target, H-share.

  Strengths

  Benefits from demand for AI PCB equipment, 1.6T CPO SLP orders, domestic substitution opportunities in ultrafast laser drilling, and the A/H valuation discount.

  Weaknesses

  Still faces uncertainty in realizing upside from laser drilling, as well as GPM and competitive pressures.

  Comparison

  Citigroup prefers the H-shares over the A-shares because the H-shares trade at about a 51% discount to the A-shares.

  Risks

  AI PCB equipment demand weaker than expected, rising component costs compressing GPM, and intensified price competition due to increased industry supply.

• Han's CNC-A (301200.SZ)

  A-shares of the same company.

  Strengths

  Has accumulated capabilities in PCB drilling, exposure, testing, forming, and laser technologies, and benefits from demand for AI PCB equipment.

  Weaknesses

  Citigroup believes the mechanical drilling story is already largely reflected in the stock price, leaving limited upside from the target price relative to the current price.

  Comparison

  The A-share target price is based on about 55x 2027E P/E, while the H-share target multiple is about 41x 2027E P/E.

  Risks

  Its higher valuation makes it more sensitive to weaker-than-expected demand or margin deterioration.

• NVIDIA CORP (NVDA.O)

  Demand-driving related party.

  Strengths

  Its midplane and backplane network architectures may increase HLC usage, thereby driving demand for PCB drilling equipment.

  Weaknesses

  The report does not directly provide an investment rating or target price for NVIDIA.

  Comparison

  Its relationship with Han's CNC is mainly the transmission of changes in AI infrastructure architecture to upstream demand for PCB equipment.

  Risks

  If adoption of the relevant architectures progresses more slowly than expected, the boost to Han's CNC equipment orders may weaken.

• Mitsubishi Electric (6503.T)

  Incumbent supplier and comparison target for CO2 laser drilling equipment.

  Strengths

  Historically relied upon by SLP manufacturers, indicating it holds a supply position in CO2 laser drilling equipment.

  Weaknesses

  The report says its supply is tight, with a lead time of about 12 months, prompting customers to switch to Han's CNC.

  Comparison

  Han's CNC's ultrafast laser drilling equipment is seen as gaining an entry opportunity under delivery constraints.

  Risks

  If Mitsubishi Electric's deliveries recover or customers readjust procurement strategies, Han's CNC's substitution opportunity may be affected.

Key data

• Report date2026-06-10Shown as 10 Jun 2026 on the report cover.
• Earnings forecast revision2026E raised by 3%; 2027E raised by 6%Citigroup said it raised earnings forecasts based on a stronger long-term outlook for PCB equipment.
• A-share target priceRmb290, previously Rmb186Based on about 55x 2027E P/E.
• H-share target priceHK$252, previously HK$160Based on about 41x 2027E P/E, a 25% valuation discount to the A-shares.
• Current price and ratingA-shares Rmb288.680, Neutral; H-shares HK$162.60, BuyThe table discloses an A-share recommendation of Neutral and an H-share recommendation of Buy.
• AI product revenue contributionMay rise to 60% in 2026, versus about 30% in 2025From management's statements during the research meeting.
• Peer demand indicatorTa Liang's May 2026 revenue increased 120% year-over-year; April-May increased 117% year-over-yearBased on this, Citigroup believes Han's CNC's 2Q26E revenue may achieve triple-digit year-over-year growth.
• Global market shareAbout 6.6% by revenue in 2024The report cites China Insights Consultancy, stating that Han's CNC is the world's largest specialist PCB production equipment manufacturer.
• China market shareAbout 10%-11% in 2024The report says the company is also China's largest specialist PCB equipment supplier.
• Earnings growth assumption2026E-2027E earnings CAGR of about 76%Citigroup believes this growth rate supports the target valuation multiple and is not aggressive.

Impact & implications

The report makes a clear distinction in investment implications: AI PCB and the 1.6T CPO chain enhance the medium- to long-term growth visibility of Han's CNC, but the A-share target price is already close to the current price, and incremental returns mainly depend on the realization of upside in laser drilling and high-end IC substrate equipment; H-shares, due to their larger valuation discount, offer better risk-reward under the same fundamental logic. At the industry level, if CPO, SLP, and midplane/backplane architectures scale up, demand for PCB equipment may expand from mechanical drilling to ultrafast laser drilling and higher-end equipment segments.

Risks

• AI PCB equipment demand weaker than expected, which may affect order and revenue growth.
• Rising component costs causing GPM to come in below expectations.
• Increased industry equipment supply leading to more intense price competition.
• There is still uncertainty over the realization of opportunities in ultrafast laser drilling and high-end IC substrate equipment.
• If CPO, SLP, or Nvidia-related network architectures scale up less than expected, incremental equipment demand may fall short of Citigroup's assumptions.

What to watch

• Order sustainability and delivery pace for SLP customers using 1.6T CPO.
• The speed at which Han's CNC's ultrafast laser drilling equipment substitutes for CO2 laser drilling equipment.
• Whether Nvidia's midplane and backplane architectures drive demand for HLC and mechanical drilling equipment.
• Whether AI product revenue contribution in 2026 can approach 60%.
• Whether 2Q26E revenue can achieve the triple-digit year-over-year growth expected by Citigroup.
• Whether GPM is affected by rising component costs or changes in product mix.
• Whether the H-share discount relative to the A-shares narrows.