IQE’s full year trading update shows strong wafer sales, with the anticipated ramp up in VCSEL wafers leading to outperformance versus full year expectations. Revenues are now expected to be not less than £150m, with PBT ahead of expectations despite lower licence income. We continue to believe that IQE has secured a valuable position in the VCSEL wafer market, providing a strong platform for further strong growth in FY’18 and beyond. IQE was a key pick for 2017 and has served us well (+310%). We expect further outperformance in FY’18 and retain our Buy recommendation and 181p target price.