IQE PLC's (LON:IQE) post-H118 close trading update notes the group continues to trade in line with current market expectations. Importantly, it comments on a significant increase in photonics revenues from product qualifications, underpinning management’s expectation of a photonics ramp-up in H218 and FY19. We raise our revenue estimates slightly but otherwise leave our forecasts unchanged.
Revenue growth held back by currency headwinds
IQE expects H118 revenues to be c £73m compared with £70m H117, as double-digit sales growth on a constant currency basis in each of the three primary markets was offset by a 9.5% currency headwind. The segmental split was distorted by inventory management factors. During both H117 and H217, significant production capacity was allocated to the VSCEL ramp-up for a 3D sensing application. During H118, sales to the chip manufacturer servicing this application were similar to H117, as the supply chain absorbed inventory, enabling the group to replenish wireless inventory channels and start work on a significant number of VCSEL production qualifications. On a constant currency basis, wireless revenues grew by almost 11% year-on-year, photonics by 30% and infra-red by c 11%.