London, UK, 28 January 2022

IQE (IQE): New CEO - new engagement with markets

IQE's share price has fallen by over 30% since FY21 guidance was reduced in November. However, we believe the downgrade relates primarily to supply chain issues in the smartphone industry, which are likely to be resolved during FY22, rather than any loss of market share. The group is therefore likely to return to growth as the handset and 5G infrastructure markets recover, potentially supporting a share price recovery too. Moreover, new CEO Americo Lemos's extensive network of relationships with global semiconductor manufacturers is likely to lead to more long-term strategic collaborations such as the one with GlobalFoundries announced in October, supporting stronger-than-market growth in the medium term.

At current levels IQE's shares are trading at a discount to the mean EV/EBITDA multiples of the sample of companies engaged in manufacturing VCSEL epitaxy. However, we believe share price recovery will require greater visibility of a recovery in the smartphone market and the timing of 5G infrastructure roll-out. 

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