Ac t i o n | 20 Oct 2025 12:42:56 ET │ 15 pages Han's CNC Technology (301200.SZ) 3Q25 Earnings Beat CitiE by 36% on Higher AI Product Contribution; Lift TP to Rmb140 CITI'S TAKE Although we have been expecting strong 3Q25 results, Han's CNC (HC) still surprised us today (3Q25 results announcement) with 3Q25 earnings (Rmb228mn, +282% YoY / +56% QoQ) strongly beating CitiE by 36% on better-than-expected revenue (Rmb1.52bn, +95% YoY / +7% QoQ and 5% ahead of CitiE) and GPM (34.0%, +8.6pp YoY / +3.3pp QoQ and 2 ...

Ac t i o n | 16 Oct 2025 04:50:23 ET │ 14 pages Han's CNC Technology (301200.SZ) 3Q25E Preview: Record High Quarterly Revenue Expected Driven by AI-Related Demand CITI'S TAKE Han's CNC (HC) will report its 3Q25 results in the evening of 20 October. In contrast of 3Q low season with 20% QoQ revenue decline on average over the past four years (2021-24), we estimate HC's revenue to grow by 2% QoQ to hit record high of Rmb1.45bn in 3Q25E, driven by continuing strong PCB mechanical drilling equipment demand from ...

Summary of Han's CNC Technology (301200.SZ) 3Q25E Preview Company Overview - **Company**: Han's CNC Technology (HC) - **Ticker**: 301200.SZ - **Industry**: PCB Equipment Manufacturing - **Market Position**: Leading PCB equipment supplier in China with a global market share of 6.6% in 2024, expected to reach 10%-11% in 2025[27] Key Financial Projections - **3Q25 Revenue**: Estimated to reach Rmb1.45 billion, a 2% QoQ increase, contrasting with a typical 20% QoQ decline in the low season[1][2] - **YoY Revenue Growth**: Expected to grow by 86% YoY in 3Q25, up from 75% YoY in 2Q25[2] - **Net Income**: Projected to increase by approximately 180% YoY to Rmb168 million in 3Q25[1] - **Gross Profit Margin (GPM)**: Anticipated to expand by 6.3 percentage points YoY to 31.7% in 3Q25[13] Market Dynamics - **AI-Related Demand**: Strong demand for PCB mechanical drilling equipment driven by AI PCB customers, particularly Victory Giant Technology (VGT), which accounted for ~15% of HC's total revenue in 1H25[28] - **Industry Comparison**: Taiwanese competitor Ta Liang reported a 96% YoY revenue growth in 3Q25, indicating robust industry demand[3] Earnings Forecast Revisions - **Revised Earnings Forecasts**: 2025/26E earnings forecasts increased by 7%/15% due to the upward revision of the AI-PCB Total Addressable Market (TAM) by 5%/35%[1][4] - **Future Revenue Projections**: Expected revenues for 2025E and 2026E are Rmb5.413 billion and Rmb7.783 billion, respectively, reflecting a growth of 62% and 44% YoY[28] Valuation Metrics - **Target Price**: Increased to Rmb124, based on a 50x P/E ratio for 2026E, which is considered not aggressive given the projected 86% earnings CAGR for 2025-26E[5][29] - **Market Capitalization**: Approximately Rmb39.06 billion (US$5.48 billion) as of 16 October 2025[7] Risks and Considerations - **High-Risk Rating**: The stock is rated as high risk due to potential challenges such as weaker-than-expected demand for AI PCB equipment, rising component costs affecting GPM, and increased price competition in the industry[30] Additional Insights - **AI-PCB Upgrade**: The global AI-PCB TAM is projected to increase significantly, with corresponding PCB equipment TAM expected to reach Rmb15.9 billion by 2026E[4] - **Capacity Expansion**: HC is well-positioned to benefit from aggressive capacity expansions by VGT and other PCB manufacturers seeking certifications from AI server vendors[28] This summary encapsulates the critical insights and projections regarding Han's CNC Technology, highlighting its strong market position, financial growth, and the potential risks associated with its operations in the evolving PCB equipment industry.

Summary of Han's CNC Technology (301200.SZ) Conference Call Company Overview - Han's CNC Technology (HC) is a leading PCB equipment supplier in China, specializing in PCB drilling, exposure, testing, formation, and attachment equipment [18][11] - HC holds a 6.6% global market share and an 11.3% market share in China for PCB equipment in 2024 [18][14][17] Core Industry Insights - The global PCB equipment market is expected to resume growth in 2024, driven primarily by AI server and data center demands [2] - The total addressable market (TAM) for AI PCBs is projected to increase by 148% YoY from Rmb14.0 billion in 2024 to Rmb34.7 billion in 2025E, and further to Rmb53.0 billion in 2026E [2][24] - AI-related PCB equipment TAM is expected to reach Rmb23.8 billion in 2026E, which is 3.8 times the market size in 2024 [2] Financial Performance and Projections - HC's earnings are forecasted to grow by 89% and 59% YoY in 2025E and 2026E, respectively, driven by a revenue growth of 50% and 39% YoY [1][24] - The company’s gross profit margin (GPM) is expected to expand as AI PCB products, which require high-end equipment, increase from less than 10% in 2024 to 30%-50% in 2025E and 2026E [1][3][29] - HC's net profit is projected to reach Rmb1,259 million by 2027E, with a diluted EPS of Rmb2.997 [6][10] Key Customer and Market Dynamics - Victory Giant Technology (VGT) is HC's largest customer in the AI sector, contributing approximately 15% of HC's revenue in 1H25 [1][24] - The demand for PCB equipment is expected to surge as more Chinese PCB makers seek certifications from AI server/data center vendors [32] Competitive Landscape - HC has replaced German competitor Schmoll as the main supplier of mechanical drilling equipment to VGT [3] - Other competitors in the PCB equipment market include Mitsubishi Electric, Amada, and various unlisted companies [5][20] Valuation and Investment Outlook - The target price for HC is set at Rmb108, based on a P/E ratio of 50x for 2026E, reflecting a strong earnings CAGR of 73% for 2025-26E [5][37] - The expected total return is 27.1%, with a market cap of Rmb36.4 billion [7][10] Risks and Considerations - Potential risks include weaker-than-expected demand for AI PCB equipment, rising component costs affecting GPM, and increased price competition due to industry supply growth [37] - HC is not significantly exposed to US tariff risks, as its sales are primarily within China and to neighboring countries [37] Additional Insights - Han's Laser, which owns 83.6% of HC, produces non-PCB laser equipment to avoid conflicts of interest, with related party transactions accounting for less than 0.2% of HC's COGS and revenue [4][32] - The early stage of the AI PCB boom may lead to an "equipment demand overshoot" as PCB makers expand capacities before securing firm orders [1][24]

Group 1 - The global server market is entering a new growth cycle starting in 2024, driven by the increasing demand for AI computing power, with an expected CAGR of 18.8% from 2024 to 2029 [2] - The PCB industry is recovering from a phase of adjustment due to weak consumer electronics and inventory cycles, with emerging demands from AI servers and high-performance infrastructure expected to drive growth from 2024 [2][3] - Domestic PCB manufacturers are actively expanding production and increasing capital expenditures, focusing on high-end products such as HDI and multi-layer boards [2][3] Group 2 - The global PCB equipment market is projected to reach 51 billion yuan in 2024, with a year-on-year growth of 9.0%, and a CAGR of 4.9% from 2020 to 2024 [3] - The demand for PCB equipment is significantly boosted by AI computing infrastructure, with the market expected to grow to 77.5 billion yuan by 2029, reflecting a CAGR of 8.7% from 2024 to 2029 [3] - Drilling, exposure, and testing equipment represent the highest value segments in the PCB equipment market, accounting for 20.75%, 16.99%, and 15.00% respectively in 2024 [3] Group 3 - The drilling equipment segment is expected to benefit from increased demand for high-end HDI, with both mechanical and laser drilling seeing growth due to the rising complexity of HDI designs [3] - The exposure equipment market is currently dominated by foreign brands, with low domestic penetration, particularly in LDI technology which is more suited for HDI [4] - The demand for plating equipment is increasing due to the higher number of plating cycles required for advanced HDI, alongside quality control pressures [5] Group 4 - Major equipment manufacturers are showing a clear upward trend, with expectations for accelerated performance in the future [6] - Key players in the drilling segment include Dazhu CNC (301200), while the exposure segment is led by Xinqi Micro (688630) and Tianzhun Technology (688003) [7] - The plating segment is highlighted by Dongwei Technology (688700), with Keg Precision (301338) noted for its role in the solder paste printing segment [7]

Summary of Conference Call Records Industry Overview - The records focus on the **PCB (Printed Circuit Board)** manufacturing industry, particularly high-layer and HDI (High-Density Interconnect) boards, and the associated equipment demands. Key Points and Arguments Equipment Demand and Market Dynamics - There is a strong demand for equipment in the production of high-layer and HDI boards, particularly for **LDI (Laser Direct Imaging) exposure machines**, **vacuum two-fluid etching lines**, **PN type presses**, **direct drilling**, and **vertical plating lines** [1][2][3] - The production of a 22-layer 5-stage HDI board requires multiple processes including laser processing, pressing, mechanical drilling, and plating, leading to a significantly higher equipment capacity requirement compared to traditional PCBs [1][5] - The high-end press market is dominated by foreign brands such as **Burkle** and **Lasa**, which have long lead times, prompting some companies to assemble domestically to reduce delivery times [1][10][11] - The laser drilling machine market is primarily led by **Mitsubishi**, known for high capacity and efficiency, making it essential in modern electronic manufacturing [1][13] Technological Trends - The vertical continuous plating line is favored for its automation and environmental benefits, utilizing pulse current to enhance impedance ratios [1][16] - The LDI technology is rapidly developing in China, with companies like **New Flag Technology** showing strong competitiveness in fine line applications [1][17] - The mechanical drilling and forming machine market is mature, with domestic manufacturers like **Dazhu Laser** and **Weijia** gaining significant market share [1][18][19] Investment Value - The investment value in the electroplating segment of PCB manufacturing is substantial, with high-end VCP systems costing significantly more than exposure machines, leading to total investments in modern factories reaching billions [2][30][31] - The complexity of ASIC product designs, such as those from **Google** and **Microsoft**, necessitates multiple drilling, plating, and pressing operations, which increases the demand for advanced equipment [2][29][33] Market Challenges and Opportunities - Domestic manufacturers are gradually entering the press market, but top-tier clients still prefer established foreign brands due to reliability concerns [1][12] - The market for laser equipment is competitive, with key players including **Dazhu Laser** and **ESI**, but challenges remain due to tariff impacts and the need for technological advancements [1][14][15] - The PCB equipment market is characterized by a high degree of customization, leading to significant price variations based on specifications and requirements [1][36] Key Equipment and Processes - The manufacturing process for high-layer boards involves multiple critical steps, including pressing, drilling, electroplating, and testing, each requiring specialized equipment [1][9][29] - The use of Q fabric in drilling applications presents challenges due to its hardness, leading to increased wear on drilling tools [1][25][26] Additional Important Content - The records highlight the importance of automated visual inspection (AVI) and final quality control (FQC) in ensuring product quality throughout the manufacturing process [1][3] - The domestic PCB equipment market shows varying levels of localization, with certain areas like drilling machines achieving high localization rates, while others, such as high-end electroplating lines, still rely heavily on foreign technology [1][21][23] This summary encapsulates the critical insights from the conference call records, providing a comprehensive overview of the current state and dynamics of the PCB manufacturing industry.

Group 1: Company Performance and Financials - The company achieved a revenue of 959,848,668.68 CNY in Q1 2025, representing a year-on-year growth of 27.89% [8] - The net profit attributable to shareholders for the same period was 116,773,485.23 CNY, showing an increase of 83.60% compared to the previous year [8] - The company’s revenue growth in 2024 was 104.56%, primarily driven by drilling equipment, which accounted for 62.84% of total revenue [22] Group 2: Market Trends and Industry Outlook - The global PCB industry is expected to grow by 6.8% in 2025, with a compound annual growth rate (CAGR) of 5.2% projected from 2024 to 2029 [19] - The demand for PCB products is increasing due to advancements in AI, 5G technology, and the recovery of consumer electronics [7][22] - The company is focusing on high-tech products such as high-layer boards and IC packaging substrates to meet market demands [15] Group 3: Strategic Initiatives and Future Plans - The company plans to issue H-shares and list on the Hong Kong Stock Exchange to enhance its capital base [13] - There is an emphasis on expanding into Southeast Asian markets, leveraging partnerships with local clients to adapt to regional supply chain dynamics [11][16] - The company is committed to developing energy-efficient PCB equipment in response to green manufacturing demands [6] Group 4: Customer Base and Market Position - The company serves 80% of the top 100 global PCB companies and has established relationships with numerous domestic and international clients [4] - It ranks first in the CPCA Top 100 list for specialized equipment for 15 consecutive years, indicating a strong market position [18] Group 5: Challenges and Responses - The company acknowledges the impact of stock price decline since its IPO, with a 40% drop from the issue price, and is focused on improving operational management [3] - In response to raw material supply challenges, the company is enhancing its procurement strategies and building relationships with key suppliers [10]