Sterlite Tech's turnaround taking shape, though some analysts see limited upside for now

In its post-earnings review in May 2025, Nuvama retained a ‘Buy’ rating with a target price of Rs135. While overall sentiment is positive, the brokerage noted some pressure on margins due to the demerger of the global business.

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Vedanta-backed Sterlite Technologies has rallied nearly 30 percent over the past six trading sessions, driven by a recent order and expansion in the data centre. While there is optimism around the stock’s turnaround, analysts caution that some near-term correction is likely due to profit booking.

Sterlite Technologies, a Pune-based digital and optical technology company, is promoted by Twin Star Overseas Ltd., which is owned by Anil Agarwal’s Volcan Investments Cyprus Ltd. On June 17, the stock hit a 52-week high of Rs 119.2. It has gained around 57 percent over the past month but is still down about 22 percent over the past year.

Analysts note that the company’s evolution from a traditional cable supplier to a full-stack digital infrastructure player has been underway for several years. However, recent developments (including a Rs 2, 631-crore BSNL contract), the launch of a new data centre solutions portfolio, and a partnership with Tech Data, suggest that this strategic pivot is finally materializing.

“A lot of this was expected as far back as 2022, but it kept getting pushed,” said Dinesh Nagpal, a technical analyst. “Now that it’s materialising, there’s a sense of momentum. If execution stays on track, the next 3–5–10 years could be very positive," he said.

Despite the turnaround narrative, not all analysts are recommending buying at current levels. Following a near-100 percent rally in just one and a half months, technical indicators are now flashing signs of a short-term cool down.

“The stock has faced resistance near the R1 level of the quarterly floor pivot after a sharp rally,” said Jigar S Patel, Senior Manager – Technical Research at Anand Rathi Shares and Stock Brokers, adding that they recommend investors consider booking profits in the Rs 110–Rs 114 range. “Fresh long positions can wait, as the risk-reward isn’t great here,” he added.

The stock is approaching a crucial resistance zone between Rs 130 and Rs 150 that witnessed heavy distribution over the past one and a half years. Analysts believe this could trigger further profit booking, particularly from long-term investors looking to exit at breakeven.

“This is a zone where the stock saw a lot of distribution earlier. There will be many investors looking to exit now because they’ve suffered capital erosion over a long period,” said Nagpal, adding that those who entered at lower levels might also be inclined to book profits. “Investors who bought recently around Rs 60–Rs 70 may start taking profits as the stock enters this zone,” he added.

However, any correction is likely to be met with strong buying interest at lower levels. “The Rs 90 to Rs 75 range is now a fantastic support zone. Any pullback toward Rs 90 or Rs 70 would be a beautiful level to add the stock,” Nagpal said.

Rajesh Palviya of Axis Securities also sees strength on the near-term chart. “I think investors can hold the position. The strong breakout has already happened with volume action, which suggests fresh buying is taking place. The trend looks bullish in the near to short term,” he said.

What do brokerages say?

The narrative around Sterlite Technologies has shifted significantly, but the market response has been uneven. The stock currently has limited brokerage coverage, with only three firms tracking it. Of these, two have a 'Buy' rating (Nuvama and Arihant Capital), while one (CLSA) maintains a 'Hold' from the previous quarter.

In its post-earnings review in May 2025, Nuvama retained a ‘Buy’ rating with a target price of Rs 135. While the overall sentiment is positive, the brokerage noted some pressure on margins due to the demerger of the global business. “We believe inventory destocking is in its final phase, and incremental demand from data centres and telcos should support revenue growth. Higher utilisation should lead to margin improvement.”

Mutual fund activity shows mixed sentiment

Mutual funds have had a mixed stance on the stock. Nippon India, ICICI Prudential, Edelweiss, and SBI Mutual Fund exited their positions entirely in FY25. On the other hand, Bandhan Mutual Fund significantly increased its stake—from just 3,000 shares in March 2023 to over 26 million shares by March 2025 across five active strategies. HDFC Mutual Fund continues to hold a significant position via its Value and Large & Mid Cap funds. Currently, only HDFC and Bandhan hold the stock in actively managed portfolios.

Competitive pressures remain

“Sterlite is no longer just a fibre optic supplier and they are now trying to be a full-stack player in data infrastructure,” said Vikas Gupta, Chief Investment Strategist at OmniScience Capital. “That’s a logical step, but also a crowded one. Every major conglomerate is entering the data centre space. Sterlite needs to grow revenues and maintain margins just to hold its ground.”

According to Bloomberg, the stock is trading at a 1-year forward P/E of 53.77x. Gupta noted that to justify such valuations, the company would need to achieve net margins of at least 7 percent and revenue growth of 10–12 percent. “Anything less, and the market may reprice it again,” he warned.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.