Sterlite Tech gains 5% as Nomura initiates coverage with 'Buy' call

Shares of Sterlite Technologies gained 5 per cent on Tuesday after Nomura initiated coverage on the optical fibre cable maker with a ‘Buy’ rating and a target price of ₹1,350. The brokerage expects strong data centre spending and tight industry supply to drive a multi-year demand upcycle, forecasting a 50 per cent revenue compound annual growth rate (CAGR) and 89 per cent Ebitda CAGR over FY26-29.

 

As of 11:18 AM, the company’s share price was trading 4.76 per cent higher at ₹1,048.80 apiece; meanwhile, Nifty 50 was trading 0.56 per cent higher at 22,682.75. The company’s stock hit an intraday high of 4.99 per cent at ₹1,051.10.

 

Nomura noted that “The OFC industry is amid a multi-year super-cycle driven by strong DC capex tailwinds that we believe is likely to persist beyond CY30F.”

 

However, constrained supply due to limited glass preform capacity, raw material bottlenecks, and limited ex-China capacity have created a persistent deficit, forcing hyperscalers into multi-year supply agreements and opening opportunities for players such as Sterlite Tech (STL), the brokerage said.

 

Nomura highlighted that STL's integrated manufacturing capability positions it to capture market share as non-integrated peers face preform supply bottlenecks. It has already secured major hyperscaler contracts and has an extensive array of DC offerings.

 

STL plans to invest ₹30 billion over FY27-29E to expand capacity by 50 per cent, backed by demand visibility. “We expect DC revenue share to rise from 1 per cent in FY26 to 40 per cent in FY29F and optical connectivity to scale rapidly,” Nomura said.

 

The brokerage noted that this mix evolution will drive Ebitda margin expansion from 12 per cent to 24 per cent, as DC/optical connectivity orders fetch high margins. “We forecast 50 per cent/89 per cent revenue/Ebitda CAGRs over FY26-29F, with PAT rising 57 times. Despite the capex, STL remains largely FCF positive due to its strong Ebitda-to-CFO ratio, while the Jul-26  ₹15bn QIP should support deleveraging,” it said.

  

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