STLTECH - Sterlite Technologies Limited. Share Price

In the Q1 FY26 earnings call for Sterlite Technologies Limited (STL), management expressed a positive outlook, emphasizing strategic priorities aimed at sustaining growth in the optical networking space. Management highlighted that STL clocked an impressive order intake of Rs.1,529 crores, nearly tripling from Rs.566 crores in Q1 FY25. Revenue for the Q1 FY26 stood at Rs.1,019 crores, reflecting a 17% year-on-year growth. EBITDA was reported at Rs.140 crores with a margin expansion to 13.7%. Management expects to maintain momentum, aiming for improved utilization rates and continued focus on cost optimization.

The strategic priorities for FY26 include increasing market share in optical fiber cables, enhancing the connectivity attach rates"”which currently stand at 23%"”and rapidly expanding STL's product portfolio to cater to the surge in demand for high-speed connectivity driven by advancements in AI and data centers. Management emphasized plans to build a robust data center business to drive long-term growth.

Forward-looking points include a projected 10% CAGR in fiber deployments in North America and a 21% global CAGR for optical cable demand through 2029. The management noted opportunities arising from government projects like India's BharatNet, valued at $2.5 billion, and investment trends among hyperscalers in the order of $100 billion by 2030. Additionally, they highlighted ongoing innovations like the launch of India's first multi-core fiber which offers 4-7x the capacity in the same fiber footprint.

Management anticipates the total optical fiber demand growth in 2025 and expects to capitalize on market recovery signs, aiming to improve performance metrics through a steady focus on innovation, operational efficiency, and geographic diversification.

Question 1: "Could you provide understanding of how the realizations have shaped up for OF and OFC, and how the spot prices have moved?"

Answer: As for pricing trends, I can't comment on specific figures for competitive reasons. However, it's fair to say that broadly, market prices have stabilized after bottoming out. Demand driven by China Mobile and Unicom tenders is contributing to this stabilization. In Europe and the US, we anticipate stability, and potentially some modest improvements in realizations due to growing market conditions.

Question 2: "With your new US facility, what are the utilization levels and overall asset sweating?"

Answer: Utilization at our US facility is improving quarter on quarter and is above 25%. We are strategically positioned to meet 'Made in America' requirements, and we're very optimistic about further improvement throughout the year as order execution ramps up.

Question 3: "What are the targets for passive connectivity and performance expectations in the digital sector?"

Answer: Our passive connectivity attach rate remains stable at 23%, which we aim to enhance, particularly in Europe and the US. For the digital business, we're focused on profitable growth; we've achieved Rs.1 crore in EBITDA. Although small now, we see potential for increased revenue as we build capabilities in AI and cybersecurity.

Question 4: "Regarding the sharp increase in order intake, is it fair to say that the phase of inventory correction is behind us?"

Answer: Yes, inventory utilization and reduction have improved significantly. While some small inventory remains with distributors, deployed volumes continue to grow, especially in the US. We're optimistic about demand for optics from data centers, which is complemented by government and private sector investments.

Question 5: "What is your strategy for the BharatNet phase III winners, and do you have partnerships established?"

Answer: Our demerged entity has secured a Jammu and Kashmir project where we will supply optical fibers. We also have MAFs with several project bidders, and we'll have better visibility on volume share as project execution begins, so updates will follow in the coming quarters.

Question 6: "What commercialization roadmap do you have for multi-core fiber and customer contracts?"

Answer: The multi-core fiber innovation significantly increases capacity and has drawn interest from hyperscalers and telecom operators. While we are in early stages of commercialization, our focus is on securing customer partnerships that will help us scale this product offering.

Question 7: "Can you provide clarity on your margins that improved this quarter?"

Answer: Margin improvement stemmed from a mix shift towards regions with higher contributions, particularly the US, where demand remains strong. The 10% tariff impact has been partially absorbed by customers, supporting improved margins despite tariff pressures.

Question 8: "What is your expectation regarding future revenue ramp-up, particularly with the strong order book?"

Answer: While I can't give specific revenue numbers for the year, our substantial order book indicates that we can expect continuous revenue throughout FY26. As we enhance global presence and improve capacity utilization, our results should reflect positively going forward.

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