Nomura initiates Buy coverage on Sterlite Tech with 48.5% upside target
Japanese brokerage Nomura has initiated Buy coverage on Sterlite Technologies with a target price of Rs 1,350, implying 48.5% upside from current levels. The rating reflects confidence in the company's positioning to benefit from strong demand for optical fibre cables (OFC), supported by its integrated manufacturing capabilities that provide an advantage as non-integrated peers face supply bottlenecks in preforms. Sterlite Tech has secured major contracts from hyperscalers and maintains a broad portfolio of data centre offerings.
The optical fibre cable industry is entering a multi-year supercycle driven by strong data centre capital expenditure expected to remain a key growth driver beyond 2030. Global and US data centre capacity is projected to grow at CAGRs of 22% and 20% respectively over 2025-2030, with AI workloads' share in the global data centre mix expected to increase from 54% to 71%, raising fibre density requirements. Supply remains constrained due to limited glass preform capacity and restricted capacity outside China, prompting hyperscalers to enter multi-year supply agreements and creating growth opportunities for players like Sterlite Tech. The company held a 9% share of the global ex-China OFC market in the first quarter of FY27.
Sterlite Technologies plans to invest Rs 3,000 crore over FY27-29 to expand capacity by 50%, supported by strong demand visibility. The company's data centre market share, currently in the low single digits, is expected to rise towards high single digits, supported by its product portfolio, established hyperscaler relationships and extensive industry experience.
