IQE’s interim results last week were in-line with expectations and our forecasts are unchanged. These imply a c.55% H2 revenue weighing in the current year, which is in-line with a typical outcome. Whilst we cannot rule out current macro pressures resulting in an inventory correction later in the year, customer forecasts are currently following normal second half patterns and we believe the group are on track to meet full year expectations. We increase our target price to 29p (from 25p) representing 10x FY’16 PER. We see scope to increase this rating as revenue diversification improves and the medium term growth opportunities begin to impact numbers. Buy.
