Citi remains positive on China's PCB equipment sector, with preference ranking of Han's Laser, Han's CNC-H, and Han's CNC-A.

Overview

This report focuses on China's PCB equipment industry and related leading companies. Citi believes AI PCB demand is changing equipment capacity allocation: production of equipment for AI-related back-drilling and similar products consumes more traditional mechanical drilling capacity, tightening supply for ordinary non-AI orders. Meanwhile, Chinese PCB makers are expanding capacity in high-end areas such as mSAP SLP and IC substrates, which may increase the revenue share of high-end products such as ultrafast laser drilling and UV laser drilling for equipment suppliers like Han's CNC.

Core views

There are three core views. First, capacity tightening caused by AI PCB equipment demand can improve equipment makers' order selection power, making them more inclined toward high-margin customers. Second, the move by domestic PCB makers toward high-end capacity expansion helps equipment suppliers break into high-end drilling segments dominated by overseas suppliers. Third, in valuation terms, Han's Laser benefits from multiple drivers including PCB equipment, IT equipment, and the Apple supply chain, while Han's CNC-H offers better risk-reward due to its significant discount relative to the A-share listing.

Analysis framework

The report combines supply-demand capacity analysis, assessment of product mix upgrades, peer and A/H-share valuation comparisons, and scenario valuation based on 2027E P/E. It assigns target prices to Han's CNC-A, Han's CNC-H, and Han's Laser, and uses bull/bear scenarios to reflect the impact of demand changes on valuation multiples.

Methodology notes

• Supply-demand analysisCapacity tightening effect

  When AI PCB equipment production uses more traditional equipment capacity, supply of non-AI equipment declines, allowing leading manufacturers to prioritize higher-margin orders.

  The report cites Ta Liang's capacity scenario: if all capacity is used for AI products, total capacity may fall from 300 units per month to 200 units per month, and it infers Han's CNC may also experience about one-third capacity contraction.

• Product mix analysisHigh-end product penetration

  Upgrading from mechanical drilling to higher-end equipment such as ultrafast laser and UV laser drilling can improve revenue quality and gross margin potential.

  The report emphasizes that Han's CNC has entered the mSAP SLP drilling segment. If downstream PCB makers expand mSAP SLP and IC substrates, equipment makers' exposure to high-end products may continue to increase.

• Valuation analysis2027E P/E scenario valuation

  Target prices are determined using 2027E earnings and different target P/E multiples, with bull/bear scenarios used to measure the impact of demand changes on re-rating or de-rating.

  Han's CNC-A's base target price is based on about 68x 2027E P/E, Han's CNC-H on about 51x 2027E P/E, and Han's Laser on 55x 2027E P/E.

Asset mapping & comparison

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

• Han's Laser Technology (002008.SZ)

  Top pick in the report

  Strengths

  Benefits from demand for PCB drilling and testing equipment, growth in Apple supply chain orders, and an upcycle in IT equipment. The report expects core profit CAGR of about 65% in 2026E-2027E.

  Weaknesses

  The business has multiple drivers and needs simultaneous delivery across PCB, IT, and Apple-related orders; part of the growth depends on new product cycles.

  Comparison

  Ranks above Han's CNC-H and Han's CNC-A in the report's investment ranking because its growth drivers are more diversified.

  Risks

  Fewer-than-expected Apple orders, intensified competition pressuring margins, weaker auto sales affecting demand for high-power laser equipment, and failure of new investment projects or new technologies replacing laser equipment.

• Han's CNC-H (3200.HK)

  Buy-rated name benefiting from AI PCB equipment demand

  Strengths

  Offers exposure to Han's CNC's strong earnings growth in 2026E-2027E and trades at more than a 50% discount to Han's CNC-A, which the report views as providing better risk-reward.

  Weaknesses

  Its target valuation is still linked to the A-share valuation with a discount applied; if A-share valuations fall or the liquidity discount widens, performance may be pressured.

  Comparison

  The report ranks it behind Han's Laser and ahead of Han's CNC-A.

  Risks

  Weaker-than-expected AI PCB equipment demand, rising component costs leading to lower-than-expected gross margin, and increased industry equipment supply triggering price competition.

• Han's CNC-A (301200.SZ)

  Neutral-rated name with strong fundamentals but high valuation

  Strengths

  Has product advantages in mechanical drilling, ultrafast laser drilling, and others, and may benefit from penetration into high-end PCB segments and strong earnings growth in 2026E-2027E.

  Weaknesses

  The report explicitly assigns a Neutral rating due to its relatively high valuation, with comparatively limited upside to the target price.

  Comparison

  The report believes Han's CNC-H offers better risk-reward than the A-share while participating in the same earnings growth.

  Risks

  Lower-than-expected AI PCB equipment demand, gross margin below expectations, and increased equipment supply leading to price competition.

• Shenzhen Fastprint Circuit Tech Co Ltd (002436.SZ)

  Case study of downstream high-end capacity expansion

  Strengths

  Recently announced capacity expansion in mSAP SLP and IC substrates, showing the trend of Chinese PCB makers moving into high-end products.

  Weaknesses

  This report does not assign a rating; it is mainly used as evidence on the demand side and industrial upgrading.

  Comparison

  Unlike equipment makers, Fastprint in the report is more of a downstream customer or industry sample driving equipment demand.

  Risks

  If its pace of high-end expansion or industry demand falls short of expectations, the logic for equipment makers' high-end product penetration may weaken.

• Taliang Technology Co Ltd (3167.TW)

  Competitor and capacity reference

  Strengths

  As a key competitor to Han's CNC in mechanical drilling equipment, its capacity scenario provides a reference for the report's capacity-tightening calculations.

  Weaknesses

  This report does not rate it; the investment implication mainly comes from capacity data rather than a company investment view.

  Comparison

  The report uses Ta Liang's change from 300 units/month to 200 units/month as an analogy for Han's CNC's potential capacity compression.

  Risks

  If Ta Liang or other competitors expand capacity faster than expected, the degree of tightness in industry equipment supply may decline.

Key data

• AI PCB equipment capacity absorptionAbout 1.5x traditional mechanical drilling capacityThe report believes production of AI-related back-drilling equipment is more capacity-intensive, leading to tighter supply of non-AI equipment.
• Ta Liang scenario capacityFrom 300 units/month down to 200 units/monthIf all capacity is allocated to AI products, competitor Ta Liang's effective capacity may decline by about one-third.
• Potential Han's CNC capacity contractionAbout one-thirdThe report infers Han's CNC may also see similar capacity compression if all capacity is used for AI-related products.
• Han's CNC market share2024 global revenue share 6.6%; China market about 10%-11%The report cites China Insights Consultancy, calling Han's CNC the world's largest specialized PCB production equipment manufacturer.
• Expected Han's CNC earnings growth2026E-2027E earnings CAGR of about 81%This growth rate is used to support the target valuation multiples for Han's CNC-A and Han's CNC-H.
• Expected Han's Laser core profit growth2026E-2027E core profit CAGR of about 65%Growth drivers come from PCB equipment and the demand cycle for IT/Apple equipment.
• Target prices and valuationHan's CNC-A: Rmb377, about 68x 2027E P/E; Han's CNC-H: HK$325, about 51x 2027E P/E; Han's Laser: Rmb177.0, 55x 2027E P/EHan's CNC-H's target multiple is set at a 25% discount relative to the A-share valuation.
• Investment rankingHan's Laser > Han's CNC-H > Han's CNC-AThe ranking reflects a combined comparison of diversified growth drivers, H-share discount, and relatively higher A-share valuation.

Impact & implications

If the report's view plays out, the investment thesis for China's PCB equipment industry will not be just short-term order growth, but also supply constraints driven by AI PCB demand and domestic substitution in high-end products. For investors, the key is to distinguish between names benefiting from multiple demand cycles with still-supported valuations, and those with high growth but valuations that already more fully reflect expectations.

Risks

• AI PCB equipment demand is weaker than expected, leading to orders, revenue, and valuation multiples below the report's assumptions.
• Rising component costs or a weaker-than-expected product mix cause gross margin to come in below expectations.
• Increased industry equipment supply triggers price competition, weakening the profit improvement from capacity tightening.
• Apple orders are fewer than expected, affecting Han's Laser's IT and Apple supply chain equipment cycle.
• Weaker auto sales may drag on demand for high-power laser equipment.
• Failed execution of new investment projects or new technologies replacing laser equipment may weaken the long-term growth thesis.
• Han's CNC-A's valuation is relatively high; if market risk appetite declines, de-rating pressure may emerge.

What to watch

• Whether AI PCB and server/data center PCB equipment orders remain strong.
• Changes in Han's CNC's revenue share from ultrafast laser drilling and UV laser drilling.
• Progress of mSAP SLP and IC substrate capacity expansion by Chinese PCB makers such as Fastprint.
• Changes in capacity utilization, lead times, and effective capacity for mechanical drilling equipment at Ta Liang, Han's CNC, and others.
• Whether the discount of Han's CNC-H relative to Han's CNC-A narrows or widens.
• Order delivery for Han's Laser from the Apple supply chain and the potential iPhone 18 foldable-screen cycle.
• Changes in gross margin, component costs, and industry price competition.
• Whether 2027E P/E valuation multiples see re-rating or de-rating depending on demand strength.