Iran war impact: L&T shares fall 12% in one week amid concerns; analyst see strong rebound

Amid the rising geopolitical concerns, brokerage firms continue to remain positive on Larsen & Toubro Ltd (L&T), despite its significant order book exposure in the Middle East (ME). Analysts are expecting the capital goods major to rise up 26 per cent from its recent lows as they believe that the reconstruction of infrastructure may add to its order book in the long-term.

To recall, shares of L&T have tumbled 12.5 per cent from their 52-week high at Rs 4,440 hit just a week ago. However, the stock made a swift rebound, rising nearly 5 per cent to Rs 4,072 on Thursday, with its market capitalization hitting at Rs 5.5 lakh crore mark. The stock has zoomed nearly 175 per cent in the last five years.

According to the market participants, international exposure in the Middle East has emerged as a key growth factor for several EPC companies. West Asia players being impacted by delay in/cancellation of fresh awarding and execution delay in ongoing projects with the ongoing conflict involving the US and Israel-Iran.

Motilal Oswal Financial Services is positive about L&T’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 international revenue, with the Middle East accounting for 39-40 per cent of its total order book as of 9MFY26; and IT subsidiary’s valuations, which are getting impacted by AI-led disruption.

“L&T is turning into a ‘moving parts’ thesis from a ‘sum-of-the-parts’ thesis. We see limited clarity on how things will unfold in the Middle East over the medium term, but it can impact execution as well as margins for certain projects. We adjust our core business valuations to 25 times to bake in the current volatile scenario for now and arrive at a revised two-year forward target price Rs 4,400,” it said with a ‘buy’ tag.

Over the past few years, L&T’s overseas share in the order book fell to 47 per cent in FY25, and further strengthened to 49 per cent of the total Rs 7.3 lakh crore as of 9MFY26. Key geographies that L&T caters to in overseas markets are the Middle East (76 per cent of the M9FY26 overseas orderbook, at Rs 3.6 lakh crore ), USA, Europe, and others, said Emkay Global.

Within the ME, L&T has the largest exposure in Saudi Arabia, where hydrocarbon sites are under execution, while renewable and Power T&D operations are spread across the region. With the ongoing conflict in the Middle East, we see potential risk in terms of execution delay and deferral of fresh awarding in the near term, it said.

Given the ongoing hostilities, we see 10 per cent impact on the FY26 order inflow, basis the order prospect pipeline. For L&T, 12,000-15,000 workers are presently working in the ME region. While it is difficult to assess the current situation, we estimate that L&T’s core earnings will be negatively impacted by 11-12 per cent for FY27E/28E,” Emkay added with a ‘buy’ and a target price of Rs 4,800.

L&T has been underperforming with a sharp decline over last 3-4 trading sessions due to tensions in gulf countries as it has a major exposure to Gulf countries. The street is broadly concerned about the execution of projects and margins since the contracts are broadly fixed price contracts, said Ankit Soni, AVP of fundamental Research at Mirae Asset ShareKhan.

“Ongoing tensions in the Middle East could exert limited downward pressure on execution timelines but we remain confident that such disruptions will not fundamentally alter its growth. The recent correction provides a favorable entry opportunity, reinforcing our view that it remains our highest-conviction pick,” he said with a ‘buy’ rating and a target price of Rs 4,700.

Phillip Capital is also positive on L&T shares as it sees capital goods stocks are projected to see 15 per cent/12 per cent order book growth in FY 27/28 after a robust 22 per cent in FY26. “Strong growth is expected for stocks including L&T and others across both years,” it added with a ‘buy’ tag and a target price of Rs 4,900.