Shares of Sterlite Tech dropped over 2% even as global brokerage as CLSA hiked its target price, driven by the firm's growing business in the US and orderbook improvements. Shares of the data centre company will be under investor's radar in today's trade. The global brokerage, in its latest note, has raised the target price for Sterlite Tech shares from Rs 118 to Rs 180.
The digital solutions firm's optical business in the US continues to expand with a revenue growth in North America at 36% for the first nine months of the financial year 2026, compared to 25% in FY25.
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CLSA has maintained a hold on Sterlite Tech shares while raising the target price.
In addition to the US markets, Sterlite is expected to be a beneficiary of the India-USA trade deal, and the reduction in tariffs will likely restore margins. When Sterlite faced headwinds in 3QFY26, after US tariffs were imposed, it reduced EBITDA margin leading to weak EBITDA performance despite strong top-line growth, primarily from the optical business, which constitutes 93% of total sales. Over the fiscal year 2028, CLSA expects Sterlite to post an improved margin of 16-18%.
The demand for Sterlite in the US is driven by high-capacity network upgrades for 5G and data center interconnect infrastructure. According to the industry, 36 times more fibre is required in GPU-dense datacentres compared to CPU racks. Sterlite's focus on the North American market is expected to lead demand growth. The company has widened its data center portfolio to high-performance cabling solutions, and 20% of revenue is from enterprise and data center products. In 3QFY26, Sterlite had secured Rs 5 billion in orders for data center, but the aggregate orderbook was at Rs 53 billion, up 3% QoQ. A big improvement in the order book is awaited, CLSA noted.
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Last month, the company announced a preferential convertible warrants issue, and promoters will be subscribing to warrants at Rs 110. As 75% of the Rs 5 billion infusion is set for repayment of loans, Sterlite's gearing can fall to 1.2x from 2.6x net debt-to-EBITDA for 9% dilution and increase promoter stake to 49%.
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