IQE

LN: IQE

Market Cap£367m

Last Close 45.8p

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

Investment summary

IQE’s H121 results are in line with management guidance given in March that H121 revenue and EBITDA would be similar to H120 levels on a constant currency basis. However, currency headwinds resulted in an 11.5% year-on-year reduction in revenues and a 28.9% drop in adjusted EBITDA. Noting that the recovery in demand for epitaxy for 5G infrastructure applications is not now likely until FY22, we have revised our FY21 estimates, cutting PBT from £2.5m to £0.1m, while leaving our FY22 estimates unchanged.

Y/E Dec	Revenue (£m)	EBITDA (£m)	PBT (£m)	EPS (p)	P/E (x)	P/CF (x)
2019A	140.0	16.2	(7.0)	(2.46)	N/A	40.3
2020A	178.0	29.9	3.2	0.29	157.9	10.3
2021E	169.5	27.4	0.1	(0.04)	N/A	13.9
2022E	185.4	39.0	6.8	0.63	72.7	10.9

Industry outlook

During H121 continued strong growth in wireless products for 5G handsets and Wi-Fi 6 routers offset a year-on-year reduction in wireless products for 5G infrastructure. While management did not comment explicitly on the photonics activity, we believe it is likely that demand for epitaxy from IQE’s major VCSEL customer, which we have previously inferred is involved in the Apple supply chain, has been steady.

Last updated on 21/09/2021