Sterlite Tech shares jump 4% as Nomura initiates coverage forecasting nearly 50% upside in 2026 multibagger. Here’s why

Shares of Sterlite Technologies jumped 4% to Rs 1,038 on the BSE on Tuesday after Japanese brokerage Nomura initiated coverage on the Vedanta-backed stock with a Buy rating and a target price of Rs 1,350, forecasting a massive 48.5% upside from current market levels.

Nomura said Sterlite Tech is well positioned to benefit from strong demand for optical fibre cables (OFC), supported by its integrated manufacturing capabilities. The brokerage said this gives the company an advantage in gaining market share as non-integrated peers face supply bottlenecks in preforms. Sterlite Tech has already secured major contracts from hyperscalers and has a broad portfolio of data centre (DC) offerings.

Sterlite Technologies held a 9% share of the global ex-China OFC market in 1QFY27. Nomura said the company’s current DC market share, which is in the low single digits, could rise towards the high single digits, supported by its product portfolio, established relationships with hyperscalers and extensive industry experience.

Multi-year growth opportunity

The optical fibre cable (OFC) industry is entering a multi-year supercycle, driven by strong data centre (DC) capital expenditure, which is expected to remain a key growth driver beyond CY30F. According to McKinsey and BNEF, global and US data centre capacity is expected to grow at CAGRs of 22% and 20%, respectively, over CY25-30E. At the same time, the share of AI workloads in the global data centre mix is projected to increase from 54% to 71%, raising fibre density requirements per rack.

Along with continued FTTx deployment, these trends are expected to drive a 14% CAGR in OFC demand over CY25-30E across STL’s key markets of North America and Europe. However, supply remains constrained due to limited glass preform capacity, raw material bottlenecks and restricted capacity outside China. This has resulted in a persistent supply deficit, prompting hyperscalers to enter into multi-year supply agreements and creating opportunities for players such as STL.

Capex will aid growth

Sterlite Technologies plans to invest Rs 3,000 crore over FY27-29 to expand its capacity by 50%, supported by strong demand visibility. The company is expected to see the share of data centre (DC) revenue increase from 1% in FY26 to 40% in FY29, while its optical connectivity business is also expected to scale rapidly.

The shift in business mix is expected to support EBITDA margin expansion from 12% to 24%, as DC and optical connectivity orders command higher margins. Revenue and EBITDA are forecast to grow at CAGRs of 50% and 89%, respectively, over FY26-29F, while PAT is expected to rise 57 times.

Despite the planned capex, Sterlite Tech is expected to remain largely free cash flow positive, supported by its strong EBITDA-to-CFO conversion. The Rs 1,500 crore QIP completed in July 2026 is also expected to support deleveraging.

Last month, the company secured Optical Fiber Nonconductive Plenum (OFNP) US certification for its Intermittently Bonded Ribbon (IBR) pre-terminated assembly portfolio, aimed at indoor AI data centre connectivity.

The company said that the factory-built cable assemblies come with installed, polished and tested connectors for high performance. The assemblies are designed to eliminate the need for field splicing and equipment, enabling faster installation and lower costs.

Sterlite Tech shares have been one of the best performers this year as the stock price has surged 430% in the last six months and about 880% on a YTD basis.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.