The Group's trading update said it is expected to beat market expectations due mainly to double-digit wafer sales growth.
Companies: IQE plc
IQE (LON: IQE) has announced this morning the Group expects its full-year revenues and PBT to be ahead of market expectations, bolstered by "materially higher" double-digit growth in sales of its semiconductor wafer products.
The announcement that Revenues are "to be not less than £150m" for the year, which will come to a close at the end of the month, has surprisingly sent shares down 3% this morning.
The stock has enjoyed an incredible run over the past two years, doubling in price in 2016 and growing almost 300% between January this year to today's current price of 149p.
The Group's Photonics operations are on track to report "approximately 100% growth" in 2017 after its VCSEL moved to mass production in June.
In its InfraRed business, Management expects to report 10% YoY growth whilst sales in its Wireless division are expected to be "broadly flat year-on-year".
IQE was slapped with an unexpected tax bill of £4.5m in the US back in October, which led to Management initiating a comprehensive review of its tax compliance in the US, UK and Asia. Today's update said the review "is ongoing and has not identified any further unrecorded liabilities".
Dr Drew Nelson, Chief Executive of IQE, said:
"I'm very pleased to confirm that IQE is on track to achieve record financial results in 2017. The adoption of VCSELs in the mass market has been a key revenue driver in the year. IQE has built a strong and sustainable lead in this complex materials technology. We see VCSEL being a long-term growth driver for the Group across a diverse range of applications including sensing, LIDAR, optical communications, industrial heating, machine vision and heat-assisted magnetic recording."
IQE has been a standout performer on London's junior market this year, making the cut on our "8 of the best-performing AIM-listed stocks of 2017" list, having grown 316% in the 10 months to October 2017.
Broker N+1 Singer released a note related to the trading update, reiterating their Buy recommendation on the stock:
"We expect to increase our FY’17 revenue forecast to c.£150.0m, translating to a significant upgrade in wafer related PBT. Licence revenue (100% margin) is expected to be c.£1.0m below our £3.0m expectation. As such we expect to upgrade FY’17 group PBT to c.£25.5m (c.5% upgrade).
We will take a closer look at our FY’18 forecasts in due course, where we expect further strong growth in Photonics, coupled with inventory re-stocking in Wireless to drive further upgrades."
IQE trades on a 12-month forecast price-to-earnings ratio of 36x versus the industry median of 20x. In the five years to 2016, Revenue and Net Profit grew at an average of 12% and 18% YoY respectively while operating margins averaged 10% for the same period.
In FY18 SIngers currently forecasts Revenues and PBT of £166m and £30m, while in FY19, these figures are forecast to reach c. £187m and £35m respectively.
