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Last close As at 25/03/2023
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▲ 3.95 (13.55%)
Market capitalisation
266m
Research: TMT
IQE notes that H121 trading was in line with management expectations. The company expects H121 revenue will be c £79m on a reported basis. This is consistent with the guidance management issued in March that H121 revenue and EBITDA would be similar to H120 levels on a constant currency basis because H121 revenue is equivalent to c £87m (constant currency), which is close to the £89.9m revenues reported in H120. Management also expects adjusted EBITDA to be similar to the prior year at constant currency (c £16m versus £16.4m H120). We leave our estimates, which depend on an H2 recovery in infrastructure revenues, unchanged.
IQE |
Benefiting from demand for 5G handsets |
Pre-close trading update |
Tech hardware & equipment |
15 July 2021 |
Share price performance
Business description
Next event
Analysts
IQE is a research client of Edison Investment Research Limited |
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IQE notes that H121 trading was in line with management expectations. The company expects H121 revenue will be c £79m on a reported basis. This is consistent with the guidance management issued in March that H121 revenue and EBITDA would be similar to H120 levels on a constant currency basis because H121 revenue is equivalent to c £87m (constant currency), which is close to the £89.9m revenues reported in H120. Management also expects adjusted EBITDA to be similar to the prior year at constant currency (c £16m versus £16.4m H120). We leave our estimates, which depend on an H2 recovery in infrastructure revenues, unchanged.
Year end |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
DPS |
P/E |
12/19 |
140.0 |
16.2 |
(7.0) |
(2.46) |
0.00 |
N/A |
12/20 |
178.0 |
29.9 |
3.2 |
0.29 |
0.00 |
161.0 |
12/21e |
175.0 |
30.3 |
2.5 |
0.21 |
0.00 |
222.3 |
12/22e |
185.4 |
39.0 |
6.8 |
0.63 |
0.00 |
74.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Benefiting from start of 5G mega-cycle
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. This is consistent with statistics from the International Data Corporation (IDC), which reported global handset shipment growth of 25.5% year-on-year during Q121 and an 11% increase compared with Q119. However, deployment of 5G infrastructure was held back by restrictions on Chinese operators sourcing items from the United States. While other regions are rolling out 5G networks as well, we do not expect this to have a material impact on IQE until Q421 and note potential downside to our estimates if infrastructure roll-outs are delayed to 2022.
Benefiting from strong iPhone demand
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. Bloomberg notes that Apple has ordered up to 90m units for the initial launch period for the iPhone 13 extending to the end of 2021, up from the typical order of 75m seen in recent years. We expect that the reduction in VCSEL chip size noted by Lumentum will be offset by deployment of world-facing direct time of flight (ToF) devices in more iPhone models.
Valuation: Dependent on infrastructure roll-out
IQE’s share price has fallen by over 30% since the FY20 results in March. At current levels, IQE is trading at a discount to the mean EV/EBITDA multiples of the sample of companies engaged in manufacturing VCSEL epitaxy. However, we believe share price recovery will require greater visibility of the timing of 5G infrastructure roll-out and of how many iPhone 13 models launched later this year will have world-facing ToF functionality.
Research: Consumer
Britvic’s Healthier People, Healthier Planet strategy proactively addresses the key environmental, social and governance (ESG) issues it faces, including consumers’ health, packaging and waste, water usage, and supply chain management. Its sustainability targets for 2025 are the continuation of ongoing actions to meet stakeholders’ expectations and contribute to a more sustainable future. At the same time, management looks far beyond the targets and takes a broad ESG approach towards both business procedures and its staff.
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