Citi Sees AI Boom Lifting PCB Stocks, Warns of Downturn in Construction Machinery

A new Citigroup report indicates a significant divergence in sector performance, with accelerating demand for artificial intelligence hardware benefiting printed circuit board (PCB) equipment suppliers while the construction machinery sector shows early signs of a cyclical downturn.

AI Hardware Demand Boosts PCB Sector

The report points to positive data from the AI PCB equipment space as a key tailwind. According to Citi, Taiwan's Giga-Byte Technology (3167.TW) reported August revenue that surged 153% year-over-year, marking a new high for the year. This is seen as evidence of accelerating demand for advanced PCBs used in AI applications.

Citi noted that this trend is a positive development for equipment manufacturers like Han's CNC (03200), which is positioned to benefit from the industry's growth.

Construction Machinery Faces Headwinds

In contrast, the outlook for construction machinery appears negative based on recent industry figures. Data from the China Construction Machinery Industry Association showed that domestic excavator shipments in August rose just 4% year-over-year to 7,986 units. This marks the second consecutive month of single-digit growth, which Citi interprets as an early sign of a cyclical reversal.

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This view is further supported by data from Pangyuan, China's largest tower crane leasing company, which has reported six straight months of year-over-year declines in its crane utilization rates since February. Citi believes these trends are negative for machinery producers such as Sany Heavy Industry (06031) and Zoomlion (01157).

Analyst Ratings

Despite the contrasting sector outlooks, Citi maintained "Buy" ratings on the mentioned construction and PCB equipment stocks. The bank is also positive on TSUGAMI (CHINA) (01651), citing strong fundamentals and its inclusion in the Stock Connect program.

Citi's price targets are as follows:

• Han's CNC (H-shares): HK$189, "Buy" rating
• Sany Heavy Industry (H-shares): HK$29, "Buy" rating
• Zoomlion: HK$8.9, "Buy" rating
• TSUGAMI (CHINA): HK$72, "Buy/High Risk" rating