Han’s Laser’s IT revenue has already exceeded its full-year guidance. Why has Citi nevertheless cut its target price?

Third-quarter profit surged: where did operations improve?

Han’s Laser reported revenue of 8.061 billion yuan in the third quarter of 2026, up 58% year on year, and net profit of 889 million yuan, up 137%. Gross margin rose 1.5 percentage points year on year to 36.5%. Revenue expansion and the improvement in gross margin together drove profit growth above revenue growth.
Despite the strong year-on-year growth, quarterly revenue and net profit fell 3% and 5%, respectively, from the previous quarter. Although gross margin rose 1 percentage point quarter on quarter, operating margin fell 0.8 percentage points to 15%. Thus, not all measures of profitability continued to strengthen during the quarter.

IT revenue was approximately 4.3 billion yuan in the first three quarters, up 120% year on year and already above the company’s original full-year 2026 guidance of 4 billion yuan. Management said the businesses overall had exceeded its own expectations, with IT the standout. This was an important basis for Citi’s upward revision to its earnings forecast for the year.
PCB was another major source of support: revenue in the first three quarters was 7.8 billion yuan, up 101% year on year, and accounted for 36.5% of total revenue, above the IT business’s 20%. Citi sees a favorable link in AI servers and data centers driving PCB manufacturers’ demand for drilling and testing equipment, with growth sources including equipment purchases outside Apple’s supply chain.
However, exceeding the full-year target ahead of schedule does not mean growth will continue to accelerate at year-end. Citi expects the IT business to enter its seasonal low in the fourth quarter, is particularly focused on pressure on gross margin, and has incorporated this factor into its valuation reduction.

Han’s Laser’s relevant 3D printing equipment is mainly used to manufacture the mid-frames of the next-generation iPhone Pro and Pro Max, making production plans for specific models critical. Information cited by Citi says Apple recently lowered iPhone 18 Pro production by approximately 15% while raising Duo production by approximately 30%. The shift in demand toward Duo could affect equipment orders for the corresponding Pro models.
The project is currently at the engineering validation testing stage, and the company has received trial orders. Management’s comments on 2027 were more cautious than before, and Citi accordingly lowered its 2027 3D printing revenue forecast by 25% to 752 million yuan. The transition from trial orders to subsequent purchases is crucial to revenue growth in this area.

Citi raised its 2026 net profit forecast by approximately 6% to 2.784 billion yuan, but left its 2027 forecast broadly unchanged at 3.963 billion yuan. The two years were treated differently: the current year was supported by IT revenue already exceeding guidance, while the following year was constrained by the downward revision to 3D printing expectations.
The target price decline primarily reflects a lower valuation multiple: Citi cut its 2027 forward price-to-earnings multiple from 49 times to 38 times, and its 12-month target price from 190 yuan to 147 yuan, a decline of approximately 23%. This reflects its more cautious view of 3D printing orders and fourth-quarter IT gross margin.
Citi maintained its Buy rating on the basis that demand for IT and PCB equipment supports growth. The lower target multiple, however, indicates that the bank has reduced the valuation premium it assigns to the incremental 3D printing business.