STL Target ₹1,350: Nomura Initiates 'Buy' on Optical Fiber Supercycle
Global institutional brokerage firm Nomura has initiated research coverage on digital network integration giant Sterlite Technologies Limited (STL) with a high-conviction 'Buy' rating, assigning an ambitious target price of ₹1,350 per share. With the stock closing near ₹1,000 on October 5, 2026, the target represents an attractive 35% upside potential from current trading levels. Nomura's bullish thesis centers on an emerging structural demand wave—termed an optical fiber 'supercycle'—fueled primarily by the hyper-expansion of artificial intelligence infrastructure and cloud computing data centers worldwide. Despite the stock already delivering an extraordinary 730% surge over the trailing 12 months and gaining nearly 879% year-to-date in 2026, Nomura contends that long-term fundamental earnings expansion is just entering its prime growth phase.
AI Data Centers Trigger Optical Fiber Squeeze: Prices Jump 90% Amid Shortage
The unprecedented scale of global data center construction is fundamentally transforming STL's business composition and margin profile. Data center revenue represented merely 1% of STL’s total top line in FY 2026, but surged to 21% by the first quarter of FY 2027, with Nomura projecting its revenue contribution to reach approximately 40% by FY 2029. Due to severe market undersupply for high-density, low-latency specialty fiber, data center optical fiber prices have soared by an eye-popping 90%. To capitalize on this high-margin supply vacuum, STL has committed a massive ₹3,000 crore capital expenditure program between FY27 and FY29 to expand total production capacity from 50 million fiber kilometers to 75 million fiber kilometers, marking a 50% scale jump.
In-House Glass Preform Advantage: Margin Expansion and Revenue Path to ₹16,107 Crore
A decisive competitive moat for STL lies in its backward-integrated manufacturing ecosystem, specifically its capacity to produce glass preforms in-house. Glass preforms represent the single most scarce and critical raw material in optical fiber fabrication, commanding 60% to 70% of the aggregate value chain. While rival fabricators face crippling raw material shortages and margin erosion from external sourcing bottlenecks, STL’s integrated control provides uninterrupted production and cost advantages. Strengthened by a ₹1,500 crore Qualified Institutional Placement (QIP) completed in July 2026, STL's deleveraged balance sheet is well-positioned to fund its capacity rollout. Nomura forecasts STL's revenue to clock a compound annual growth rate of roughly 50% from ₹4,745 crore in FY26 to ₹9,518 crore in FY27, ₹12,594 crore in FY28, and ₹16,107 crore in FY29. Concurrently, operating EBITDA is modeled to surge at an 89% CAGR, doubling operating margins from 12% to 24%, while bottom-line net profit is projected to jump from ₹44 crore in FY26 to ₹2,558 crore by FY29. Nomura values STL at approximately 30 times its December FY28 estimated P/E (factoring a ₹19 per share deduction for litigation contingencies)—representing an attractive 20% discount compared to cable and wire peers like Polycab India and KEI Industries, which trade between 36 and 38 times earnings.
