Shares of HANS CNC (03200) have surged more than 6%. At the time of writing, the stock is up 4.67%, trading at HK$181.5 with a turnover of HK$249 million.

The upward movement follows a research note from Citigroup expressing continued optimism for China's PCB equipment sector. The report suggests that the allocation of production capacity for AI-related PCBs is creating a squeeze effect on non-AI segments. Furthermore, the ongoing expansion by Chinese PCB manufacturers into higher-end products is seen as a source of potential upside.

In terms of stock preference, Citigroup favors the H-shares of HANS CNC. The bank views the parent company, HANS Laser, as possessing diverse growth drivers, while noting that the H-shares of HANS CNC trade at a discount of over 50% compared to its A-shares.

Citigroup further elaborated that if Taiwan's Dynamic Electronics (3167.TW), a key competitor of 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 were to fully allocate its capacity to AI products, its drilling equipment output would also shrink by about one-third. The bank anticipates that this capacity squeeze effect will likely lead HANS CNC to prioritize non-AI customers who can offer higher profit margins.