Sterlite Technologies shares jumped nearly 5% in Tuesday's trade after Nomura initiated coverage on the stock with a Buy rating and a target price of Rs 1,350, citing strong growth prospects from rising data centre investments and increasing demand for optical fibre.
At around 11:15 a.m., the stock is trading at Rs 1,049 apiece on the NSE, gaining around 4.8% from its previous close at Rs 1,001.25.
In the past year, the stock has surged close to 770%, while rallying more than 40% in the past month alone, and today's positive outlook from the global brokerage further adds to the rally.
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Data Centre Boom To Drive Growth
Nomura expects the optical fibre cable industry to benefit from a multi-year demand cycle, supported by rapid data centre capacity additions and increasing artificial intelligence workloads. It expects global and US data centre capacity to grow at compound annual rates of 22% and 20%, respectively, till 2030.
Alongside continued fibre rollout, this could drive a 14% compound annual growth rate in optical fibre cable demand across Sterlite Technologies' key markets of North America and Europe.
At the same time, limited glass preform capacity, raw material bottlenecks, and restricted supply outside China are creating supply constraints. Nomura believes Sterlite Technologies' integrated manufacturing capabilities could help it gain market share.
The company had a 9% share of the global ex-China optical fibre cable market in the first quarter of fiscal 2027. Its data centre market share, currently in the low single digits, could move towards the high single digits according to Nomura.
Having said that, Nomura has also highlighted certain key risks including slower AI and data-centre capex, faster-than-expected industry capacity additions, weaker order intake or execution, and potential cash outflows from legal claims, which investors need to be aware of.
Revenue Mix Set For Major Shift
Sterlite Technologies plans to invest Rs 3,000 crore between fiscal 2027 and fiscal 2029 to expand capacity by 50%. Nomura expects the data centre business to account for 40% of revenue by fiscal 2029, compared with 1% in fiscal 2026.
The brokerage expects Ebitda margin to expand from 12% to 24%, while revenue and Ebitda are forecast to grow at compound annual rates of 50% and 89%, respectively, between fiscal 2026 and fiscal 2029, while PAT is estimated to rise 57 times.
Separately, the company has also secured a long-term supply agreement worth around $1.2 billion with a hyperscale partner. Sterlite will be supplying optical connectivity products under this agreement till December 2030, which provides long-term revenue visibility.
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