IQE

LN: IQE

£706.6m market cap

88.3p 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

IQE has announced it expects FY20 revenues to be c £178m. This is ahead of our estimates, which we revised upwards in November, reflecting outperformance in both the wireless and photonics segments. We have updated our FY20 forecasts. Given IQE’s leveraged business model, this results in a 64% uplift in EPS. Noting the uncertainty about the effect of a pandemic-related recession on the rate of smartphone sales growth, we leave our FY21 estimates unchanged for the time being.

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 64.0 39.6
2019A 140.0 16.2 (7.0) (2.46) N/A 77.7
2020E 178.3 33.3 6.6 0.63 140.2 21.7
2021E 183.3 38.8 12.0 1.16 76.1 27.5
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 21/01/2021
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Sector
TMT
Share price graph
Balance sheet
Forecast net debt (£m) 46.1
Forecast gearing ratio (%) 17
Price performance
%
1m
3m
12m
Actual 23.8 61.1 80.2
Relative* 18.1 38.2 100.2
52-week high/low 88.3p/20.0p
*% 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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