£527m market cap

66.6p 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

In this video CFO Tim Pullen, who joined IQE in February 2019, discusses his early impressions of the business as well as its medium- to longer-term outlook. He explains why management remains confident that there will be an inflection in demand for compound semiconductors and the initiatives that IQE has implemented across photonics/3D sensing, wireless and other applications to capitalise on this. He also discusses the benefits that management expects to generate from the optimisation and investment in the company’s manufacturing facilities, and the path to profitability and cash generation from here.

Y/E Dec
Revenue (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 154.6 37.1 24.5 3.38 19.7 15.5
2018A 156.3 28.4 14.0 1.38 48.3 29.9
2019E 147.2 22.5 5.4 0.52 128.1 28.1
2020E 179.0 42.9 24.5 2.41 27.6 14.9
Last updated on 25/07/2019
Industry outlook

IQE’s dominant position in the outsourced compound semiconductor epitaxy market means it has supply relationships with multiple non-US (and US) customers. It is therefore relatively agnostic to any mid- to long-term shifts in market share at either component or OEM level. For example, it is engaged in initial production activities with two Asian customers who stand to benefit from wireless supply chain shifts. On the photonics side, management expects to start mass production for two additional VCSEL customers in H219, with a further 13 customers at the sampling stage. In addition, IQE is engaging with multiple Asian chip companies on 10G and 25G lasers for data comms. These new business opportunities should mitigate the lack of business from the InP laser chip customer in the medium term.

Last updated on 25/07/2019
Share price graph
Balance sheet
Forecast net debt (£m) 14.7
Forecast gearing ratio (%) 5
Price performance
Actual 19.1 (11.9) (34.9)
Relative* 17.8 (12.3) (33.1)
52-week high/low 112.5p/51.6p
*% relative to local index
Key management
Phil Smith Chairman
Drew Nelson CEO
Tim Pullen CFO

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