While IQE does not compete in commoditised semiconductor market, greater than expected price cuts can lead to margin erosion. Historical price drops for the past 10 years averages at c.5% and the company has successfully protected profitability by improving efficiency and sales mix. We find the key risk lies in end market development. Given the company’s long-term R&D commitment to new technologies, forecasting new application market development and end demand is beneficial but an extremely difficult task. Longer than expected market development or slower demand could hinder the growth of IQE. As for foreign currency, the company is largely exposed to USD transaction. However, the net impact from currency move appears limited as they are naturally hedged.Full report is available via Capital Network website
The nanomaterials market is transitioning from a concept technology to commercial applications. Haydale (LON:HAYD) specialises in the integration of nanomaterials into commercial and industrial technologies. We argue that this is a good position to occupy within the value chain – exposed to end market growth but not exposed (negatively) to the likely future price compression in raw graphene or other nanomaterials.
Major applications for Haydale (LON:HAYD) include composite materials, specialty inks and coatings, and additive manufacturing (3D printing). The nanomaterials are graphene and silicon carbide, and potential others in future. We argue that these applications have now reached a tipping point from research to commercial reality (see pie charts p2).
In the trading update of July 19th, Haydale (LON:HAYD) announced that FY June 2017 total income (revenue and other) has doubled, meaning about £3.9m for the year. Based on the order backlog, and major projects under way, we expect further strong growth in the next few years. We consider two of the specific channels for further growth.
In November 2016 Haydale announced a Joint Development Agreement with Huntsman Corporation to develop graphene enhanced resins. Adding small amounts of graphene in the resin layers of materials like carbon fibre can dramatically improve (x10) the dissipation of electrical charge (aerospace applications) and heat (aeros and autos). The deal with Huntsman potentially dramatically accelerates Haydale’s penetration of this market.
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