IQE

LN: IQE

£627.4m market cap

78.4p last close

IQE is the leading supplier of epitaxial compound semiconductor wafers globally. The principal applications include radio frequency semiconductors, devices for optical networks, vertical cavity lasers, infrared semiconductors and power electronics.

Investment summary

The breadth of IQE’s technology portfolio and ability to serve compound semiconductor chip customers in the US and Asia puts it in a good position to benefit from rising demand for compound semiconductor applications for 5G and connected devices. Infrastructure roll-out appears relatively unaffected so far by the coronavirus pandemic. Global handset shipments are expected to pick up in 2021, potentially stimulated by new ‘must-have’ AR apps enabled by 5G connectivity and world-facing time-of-flight (ToF) devices, supporting a trebling of PBT in FY21.

Y/E Dec
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 156.3 26.4 14.0 1.38 56.8 35.2
2019A 140.0 16.2 (7.0) (2.46) N/A 69.0
2020E 170.6 30.3 4.2 0.38 206.3 23.7
2021E 183.3 38.2 12.0 1.16 67.6 22.3
Industry outlook

In September we noted that IQE’s longstanding wireless customers had benefited from major design wins and investment in 5G infrastructure and handsets. This trend has continued. Similarly production for IQE’s major vertical cavity surface emitting laser (VCSEL) customer, which we have previously inferred is involved in the Apple supply chain, has been consistently strong throughout the year so far.

Last updated on 14/01/2021
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Sector
TMT
Share price graph
Balance sheet
Forecast net debt (£m) 52.2
Forecast gearing ratio (%) 19
Price performance
%
1m
3m
12m
Actual 15.0 35.6 62.9
Relative* 10.1 17.9 79.5
52-week high/low 78.4p/20.0p
*% relative to local index
Key management
Phil Smith Chairman
Drew Nelson CEO
Tim Pullen CFO

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