£518.4m market cap

64.7p last close

IQE is the leading global supplier of advanced semiconductor wafer products and material solutions to the semiconductor industry. Applications include radio frequency semiconductors, optical network devices, VCSELs and infrared semiconductors.

Investment summary

As flagged in IQE’s January trading update, group revenues grew by 27% year-on-year during FY20 to a record £178.0m. Wireless revenues jumped by 38% to £94.2m, benefiting from 5G infrastructure deployments in Asia and 5G handset adoption. Photonics revenues rose by 17% to £81.6m. Production for IQE’s major VCSEL customer was consistently strong throughout the year. Given the high proportion of fixed costs, the strong year-on-year revenue growth took the group from a £4.7m adjusted operating loss in FY19 to a £5.4m adjusted operating profit.

Y/E Dec
Revenue (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2019A 140.0 16.2 (7.0) (2.46) N/A 56.9
2020A 178.0 29.9 3.2 0.29 223.1 14.5
2021E 175.0 30.3 2.5 0.21 308.1 18.4
2022E 185.4 39.0 6.8 0.63 102.7 14.9
Industry outlook

These favourable trends have continued into FY21. Industry pundits predict a recovery in global handset sales during FY21, which for IQE means that demand for wireless epiwafers for handsets has been strong so far this year, and demand for photonics wafers for 3D sensing applications remains positive. We have left our FY21 estimates broadly unchanged on a constant currency basis, but have cut our FY21 revenue estimate by £8.3m and PBT by £9.5m to reflect the strengthening of sterling against the US$.

Last updated on 13/04/2021
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Share price graph
Balance sheet
Forecast net debt (£m) 51.8
Forecast gearing ratio (%) 20
Price performance
Actual (12.1) (17.2) 61.8
Relative* (14.1) (19.9) 32.8
52-week high/low 88.3p/34.6p
*% relative to local index
Key management
Phil Smith Chairman
Drew Nelson CEO
Tim Pullen CFO
Amy Barlow Head of Investor Relations

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