L&T Shares Plummet 7.5% Amid Middle East Conflict, Market Capitalization Drops Below Rs 5 Lakh Crore.

Larsen & Toubro (L&T) Stock Falls 7.5% Amid Ongoing US-Iran Conflict

Market Capitalization Falls Below Rs 5 Lakh Crore Mark

On March 13, Larsen & Toubro (L&T) shares declined by 7.5% to Rs 3,445 apiece, with a market capitalization of below Rs 5 lakh crore. The company's stock has fallen over 20% in March so far. The decline is attributed to the ongoing US-Iran conflict, which has soured investor sentiment.

Middle East Orders and Market Sentiment

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As a major engineering company, L&T depends heavily on Middle East orders, accounting for nearly 39-40% of its total order book as of 9MFY26. The ongoing conflict has raised concerns about project execution, international revenue, and IT subsidiary valuations. Motilal Oswal Financial Services has adjusted its core business valuations to 25x (from 27x) to reflect the current volatile scenario.

Financial Performance

For the nine months ended December 31, 2025, international orders stood at Rs 1,91,084 crore, contributing 55% of the total order inflow. International revenues were Rs 38,775 crore, constituting 54% of total revenues. The company reported a 4.2% drop in consolidated profit after tax at Rs 3,215 crore in the December quarter due to one-time provision for employee benefits related to new labour codes.

Growth Prospects and Risks

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Despite the current headwinds, L&T's growth outlook remains positive, driven by its strong order book and prospects of healthy core PAT earnings over FY25-28E. However, analysts warn that the ongoing conflict could impact project execution, physical damage to infrastructure and hydrocarbon sites, and cancellation of projects.

Recommendations

Analysts at Motilal Oswal Financial Services maintain a BUY rating with a revised two-year forward target price of Rs 4,400. Other analysts, such as CLSA and Axis Capital, also recommend a cautious approach, warning about the potential impact of the conflict on project execution and earnings. However, some analysts see the pullback as a buying opportunity, given the company's long-term prospects.