£212.3m market cap

26.66p 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

Yesterday’s trading update confirms that IQE’s FY19 results will be in line with the revised guidance it provided in November when the full extent of the impact of the US-China trade war became visible. We have cut our FY20 revenue estimate by 6%. In IQE’s case the impact of COVID-19 on global handset demand is likely to be softened by gaining share in both the wireless and photonics markets. However, the full effect of the pandemic on the global economy and IQE’s business remains to be seen.

Y/E Dec
Revenue (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 154.6 37.1 24.5 3.38 7.9 6.2
2018A 156.3 28.4 14.0 1.38 19.3 12.0
2019E 139.4 9.1 (8.0) (0.82) N/A 30.7
2020E 143.7 19.7 (6.2) (0.83) N/A 14.2
Industry outlook

We note the disruption to semiconductor supply chains being caused by the coronavirus outbreak. Apple for example has reduced its revenue guidance for the current quarter as worldwide iPhone supply will be temporarily constrained because its manufacturing partner sites in China are ramping up more slowly after the Chinese New Year closure than it had anticipated and because demand for its products within China has been affected as a result of store closures. Both Qorvo and Qualcomm have widened and reduced the low end of its guidance range for the current quarter. The potential impact on IQE will depend on whether Chinese manufacturers can recoup lost production and Chinese consumers simply delay purchasing electronic devices from the holiday period to later in the year.

Last updated on 31/03/2020
Share price graph
Balance sheet
Forecast net debt (£m) 17.6
Forecast gearing ratio (%) 6
Price performance
Actual (44.5) (45.6) (63.8)
Relative* (34.3) (26.5) (53.7)
52-week high/low 94.2p/20.0p
*% relative to local index
Key management
Phil Smith Chairman
Drew Nelson CEO
Tim Pullen CFO

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