L&T shares fall 7.5% amid Middle East war, m-cap declines below Rs 5 lakh crore: What lies ahead?

L&T shares fall 7.5% amid Middle East war, m-cap declines below Rs 5 lakh crore: What lies ahead?

Shares of engineering major Larsen & Toubro (L&T) declined a whopping 7.5% to Rs 3,445 apiece on March 13 as the US-Iran war continues unabated. The heavyweight stock fell over 20% in March so far and its market capitalisation went below the Rs 5 lakh crore-mark. The company depends on Middle East orders and the ongoing conflict has soured the investor sentiment towards the stock, which emerged as the top Nifty loser on March 13. Motilal Oswal Financial Services said the company is "turning into 'moving parts' from 'sum-of-the-parts'". "With a constantly changing scenario in the Middle East impacting core EPC business and increasing risks for IT business from AI-led disruption, LT is turning more into a 'moving parts' thesis from a 'sum-of-the-parts' thesis. While we are positive about the company's growth outlook based on its strong order book and prospects of healthy core PAT earnings over FY25-28E, we do believe that near-term headwinds persist on 1) international revenue, with the Middle East accounting for nearly 39-40% of its total order book as of 9MFY26; and 2) IT subsidiary's valuations, which are getting impacted by AI-led disruption. 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. We adjust our core business valuations to 25x (from 27x) to bake in the current volatile scenario for now and arrive at a revised two-year forward TP of Rs 4,400 (versus Rs 4,600 earlier). Retain BUY," said the brokerage. All this information is for reference and for learning. This is not a buy/sell recommendation. Thank you, Technofunda24