IQE announced at midday yesterday that it had successfully renegotiated its long-term supply contract with its premier Tier 1 customer, for the supply of wafer products used in wireless applications. The group estimates that the contract will contribute more than $55m of revenue during FY’16. The renewal of this contract is not a surprise given IQE’s market share in Wireless and strong customer relationships, but we view the expected size of the contract in FY’16 as a positive, given recent Wireless market commentary. The shares have rallied from their December lows but still sit on an FY’16 PER of just 7.4x. We continue to view this as attractive given the group’s market position, increasing revenue diversification, high margin revenue streams and medium term growth potential. We retain our 29p target price and remain at Buy.