The stock had declined nearly 10% in the last four sessions as the raging war raised investor worries for the company, which has significant exposure to the Middle East. Snapping the trend, the shares of the company rose to Rs 3,971 apiece in the morning trading hours on Thursday.
A New York Times report stated that Iranian intelligence operatives indirectly contacted the CIA for talks, which triggered cheers in global markets amid expectations of some de-escalation in the conflict.
Motilal Oswal Financial Services, in its latest report, said that L&T is turning more into a ‘moving parts’ thesis from a ‘sum-of-the-parts’ thesis, with a constantly changing scenario in the Middle East impacting the core EPC business and increasing risks for the IT business from AI-led disruption.
Near-term headwinds to persist for L&T
While the brokerage remains positive about the company’s growth outlook based on its strong order book and prospects of healthy core PAT earnings over FY25-28E, it believes that near-term headwinds persist. It explained that the company’s international revenue remains a key watch, as the Middle East accounts for nearly 39-40% of its total order book as of 9M FY26. Its IT subsidiary’s valuations, which are being impacted by AI-led disruption, also need to be monitored, according to the brokerage.
“We have limited clarity on how things will unfold in the Middle East over the medium term, but in the near term it can impact execution as well as margins for certain projects,” Motilal said. “We adjust our core business valuations to 25x (from 27x) to bake in the current volatile scenario for now,” it added.
Motilal Oswal reduces target price for L&T
The domestic brokerage reduced its target price for the shares of L&T to Rs 4,400 apiece from Rs 4,600 apiece, while retaining its ‘Buy’ rating. The latest target price implies an upside potential of more than 13% from the stock’s previous closing price of Rs 3,886 apiece.
Motilal listed a possible slowdown in order inflows, geopolitical issues, delays in the completion of mega and ultra-mega projects, a sharp rise in commodity prices, an increase in working capital, and increased competition as downside risks to its estimates.
Earlier, domestic brokerage JM Financial said the engineering major could face execution disruptions in its Middle East projects, while a potential slowdown in the UAE’s real estate market can intensify competition.
“The Middle East is a strategically significant market for Larsen & Toubro, with a deep and long-standing business presence across the region spanning energy, infrastructure, renewables and technology. We are closely monitoring the evolving situation and confirm that all our employees, workers and assets on the ground are safe. Our Management Committee is being updated on a real-time basis by our on-ground teams, business partners and local state administrations to ensure full situational awareness at all times,” L&T said in a statement.
The Middle East accounted for 33% of the order inflows as part of the company’s Rs 3.46 lakh crore order book recorded in the first nine months of FY26.
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