During the earnings call, management increased its FY27 EBITDA margin target to 23%, ahead of its earlier guidance of 20% by the end of the fiscal. The revision comes after STL delivered an EBITDA margin of 20.8% in the June quarter, achieving its earlier full-year target in the very first quarter.
By CNBCTV18.com
Shares of Sterlite Technologies Ltd. (STL) fell as much as 4% on Thursday, July 30, after the company reported a strong June-quarter performance and raised its profitability guidance for FY27.
During the earnings call, management increased its FY27 EBITDA margin target to 23%, ahead of its earlier guidance of 20% by the end of the fiscal. The revision comes after STL delivered an EBITDA margin of 20.8% in the June quarter, achieving its earlier full-year target in the very first quarter.
The company said margin expansion will be supported by three key drivers - higher capacity utilisation, an increasing contribution from its higher-margin data centre business, and a higher optical connectivity attach rate.
STL now expects its Data Centre and Enterprise business to contribute around 50% of FY27 revenue, significantly higher than its earlier expectation of 30%. The segment accounted for 21% of revenue in Q1FY27, compared to just 1% in FY26.
The company did not provide any revenue guidance for FY27.
Management also reiterated its focus on increasing the optical connectivity attach rate, which improved to 16% in Q1FY27 from 15% a year ago. The company expects this to exceed 20% from the September quarter and reach 25% by the end of FY27. The attach rate reflects STL's strategy of selling complete optical connectivity solutions, including connectors, fibre assemblies, panels, AI data centre connectivity products, and FTTH solutions, rather than only optical fibre cables.
STL believes AI infrastructure will remain a long-term growth opportunity. Management said India is still in the early stages of building AI data centres, while Europe could emerge as a meaningful growth market over the next one to two years.
Geographically, North America contributed 54% of revenue during the quarter, up from 39% in FY26, while Europe accounted for 25% and the Rest of the World contributed 22%.
The company plans to invest around ₹500 crore annually over the next three years, taking cumulative capex to nearly ₹1,500 crore. The investments will be used for equipment upgrades and debottlenecking across its glass, fibre, cable and connectivity businesses.
For the June quarter, STL reported its highest-ever quarterly revenue of ₹1,910 crore, up 87% YoY and 32.5% sequentially. EBITDA margin expanded to 20.8% from 13.7% a year ago, while net profit surged to ₹197 crore from ₹10 crore in the year-ago period, marking its highest-ever quarterly PAT margin.
Order inflows during the quarter stood at ₹13,100 crore, driven by a $1.1 billion multi-year hyperscaler contract for AI data centre connectivity extending through FY29. The company's open order book expanded 2.4 times sequentially to ₹18,618 crore, with ₹2,228 crore scheduled for execution in Q2FY27 and the balance thereafter.
STL also ended the quarter with a net cash position of ₹483 crore after raising ₹1,500 crore through a qualified institutional placement (QIP).
Institutional shareholding rose to a record 33%, with investors including Nomura, HSBC, Motilal Oswal and Bank of India. Credit rating agencies also turned more positive, with CRISIL revising its outlook to Stable and ICRA upgrading STL's rating to AA Stable.
Shares of Sterlite Tech are trading 4% lower on Thursday at ₹501. The stock is still up 390% so far this year.