IQE PLC (LON:IQE) has announced an immediate slowdown in shipments of VCSEL wafers, which materially affects FY18 revenues and profitability, and has issued revised guidance. Although we have cut our EPS estimates by 43% and 24% for FY18 and FY19 respectively, we note this is a short-term problem that does not impact the prospects for photonics growth in the medium term. Our revised estimates give an indicative value of 73p/share.
Short-term impact on revenues and profitability
On Monday, IQE announced that earlier that day one of its customers in the VCSEL supply chain, had received notice from one of its largest customers for 3D sensing laser diodes that it was materially reducing shipments for the current quarter IQE ramped up production for this application (which we previously inferred is for FaceID in new iPhones) during H217, following which production dropped back as the inventory overbuild was worked through, so IQE only started to build-up inventory for this application again this quarter. It now has to cut back production for this application. The temporary dip in production will materially affect FY18 revenues and profitability.
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