Pick-and-Shovel Play on Data Consumption Driven Fiber Buildout; Initiate at OW

Research evidence excerpt

Pick-and-Shovel Play on Data Consumption Driven Fiber Buildout; Initiate at OW

a unique business model, its § = Consensus data is provided by Refinitiv Estimates

e = Morgan Stanley Research estimates

proprietary FUSE360 software, and a heavy skew of business toward re-occurring

Quarterly EPS ($)

sales (~92% of revenues tied to Master Service Agreements or MSAs), providing the 2026e 2026e 2027e 2027e

Quarter 2025 Prior Current Prior Current

backbone for solid profitable growth and what we believe is an attractive

Q1 - - 0.00a - 0.14

investment. Q2 - - 0.07 - 0.18

Q3 - - 0.23 - 0.29

Industry backdrop alone supports continued double digits top-line growth. While Q4 ND - 0.14 - 0.21

fears of declining telecom capex are understandable, we see fiber deployment, e = Morgan Stanley Research estimates, a = Actual Company reported data

BEAD-funded broadband construction, data center connectivity, and telecom

outsourcing as ample fodder to creating multiple ways for the company to continue

to grow double digits. Specifically, fiber passings to the home are forecasted to

grow at a ~14% CAGR between 2025 and 2030, data center related fiber demand is

expected to more than double between 2024 and 2029, and government funding

(BEAD) deployment is expected to increase from ~$0.6B in 2026 to ~$4-6B

annually in 2029-35. Combining that with the company's ability to gain share

(particularly from regional players) and its investments to grow in adjacent utilities

markets, we see an attractive organic demand backdrop for ITG over the next 5-10

years.

A materially de-risked valuation leaves more room for upside than downside.

Morgan Stanley does and seeks to do business withBased on our DCF analysis, shares are currently pricing in not only skepticism that