Stocks to buy: Play data centre theme with these 2 multibagger stocks

With limited avenues to play the data centre theme in India, as companies controlling nearly 80 per cent of the co-location market are either unlisted or in the process of listing, Nomura believed investors should focus on data centre equipment and component manufacturers, which account for 60-75 per cent of total data centre capital expenditure, to gain exposure to the sector's growth. Its top two picks are multibagger stocks CG Power and Industrial Solutions Ltd and GE Vernova T&D, both multibagger stocks.

GE Vernova T&D has doubled investor money in the past one year and is up 3,313.98 per cent in the past five. CG Power, on the other hand, is up 33 per cent in the past one year and a solid 971.56 per cent in the past five years. Nomura believes the two companies are likely to be the biggest beneficiaries of the DC opportunities due to their product offerings and strong market positioning.

On Tuesday, Nomura suggested a target of Rs  5,675 on GE Vernova T&D, suggesting 17 per cent upside potential. CG Power's target has been set at Rs 1,050, hinting at 19 per cent upside.

Nomura said India's data center industry is emerging as one of the fastest growing globally, with India’s data center IT load increasing from 350MW in 2019 to 1.5-1.6GW in 2025, implying a 29 per cent growth annually against 20 per cent globally. 

"As such, India’s share in global DC capacity consequently increased from 1.5 per cent in 2019 to 2-3 per cent in 2025. Our analysis, based on announced pipelines, suggests the industry has visibility on +15GW of incremental capacity over the next decade, and we expect India’s DC capacity to reach 7GW by 2030F (up 30 per cent CAGR)," it said. 

Nomura said India remains cost-efficient with construction costs of $6-7 million per MW versus $10-18 million per MW across developed APAC and Western markets. 

"Within India’s capital markets, for investors, the most attractive exposure is in the industrial supply chain, in our view. We estimate five product categories: (i) medium- and low-voltage switchgear and transformers, (ii) UPS and battery systems, (iii) backup diesel and gas gensets, (iv) precision cooling and liquid-cooling distribution units, and (v) rack, busway, and structured cabling infrastructure together absorb 60-75% of a DC's USD10-22mn/MW capex budget," Nomura said.

The foreign brokerage said players such as ABB India (Reduce), Siemens (Neutral), Hitachi Energy India (Not rated), GE Vernova (Buy), CG Power (Buy), Cummins (Neutral) are acting as oligopolistic suppliers across multiple sub-categories. 

"We believe the delivery lead time of two-tofour years has created an enviable seller's market with multi-year backlogs that are converting today's bookings into revenue for 2027-29F for companies operating in the DC supply chain. Further, we think premium pricing is being captured because DC projects demand higher reliability, tighter customization, accelerated lead times, certifications, and on-site engineering support that traditional commercial or industrial projects do not require," it said.