IQE is benefiting from multiple megatrends as it supplies epitaxy for the photonics chips that transmit data in the volumes required for full adoption of the Internet of Things and provide the accurate visual information required for autonomous vehicles, Industry 4.0, augmented reality and virtual reality. This is driving a second wave of growth, with an estimated 66% increase in PBT forecast between FY16 and FY19. Our DCF analysis indicates that the share price is undervalued if photonics growth resumes in Q219 and is sustained over a five-year period, in line with management guidance.