Larsen & Toubro has crashed 12% in the last two trading sessions; Is it the right time to buy?

Synopsis: Shares of Larsen & Toubro Ltd fell over 7% amid concerns over Middle East exposure and fixed-price contracts. Despite risks, brokerages like Macquarie Group and CLSA maintain ‘Outperform’ ratings, citing strong order backlog and manageable earnings impact.

The shares of this company engaged in providing EPC solutions in key sectors such as Infrastructure, Hydrocarbon, Power, Process Industries and Defence, Information Technology  and etc are in the spotlight after it fell by 7% in today’s session amid concerns over its Middle East exposure, though brokerages continue to see nearly 29% upside from current levels.

With a market capitalisation of Rs. 5,25,201 cr, the shares of Larsen & Toubro Ltd were trading at Rs. 3,818 per share, declining 7.5% in today’s market session, making a low of Rs. 3,760.10, down from its previous close of Rs. 4,066.45 per share. 

News 

Shares of Larsen & Toubro (L&T) came under significant pressure on March 4, falling as much as 7% in today’s session and extending losses for a fourth consecutive session. The decline was largely driven by investor concerns over the company’s elevated exposure to the Middle East, especially at a time when geopolitical tensions in the region remain heightened.

Nearly 37% of L&T’s total order book is directly linked to projects in the Middle East, with about 55% of its Gulf orders structured as fixed-price contracts. This has raised worries about margin risks, as fixed-price agreements can limit flexibility in passing on higher input costs. 

Brokerage  Commentary 

Global brokerage Macquarie Group highlighted potential headwinds from geopolitical instability, commodity price volatility, and AI-led disruptions that could impact execution and profitability.

Despite these concerns, brokerages have largely maintained a positive stance on the stock. Macquarie reiterated its ‘Outperform’ rating with a target price of Rs. 4,910, implying nearly 29% upside from current levels. 

Similarly, CLSA retained its ‘Outperform’ call with a Rs. 4,842 target, suggesting about 27% potential upside. Both firms view the recent correction as an opportunity for long-term investors rather than a structural deterioration in fundamentals.

CLSA also downplayed the potential earnings impact from extreme geopolitical scenarios. It is estimated that even in the event of a complete blockade of the Strait of Hormuz through March, L&T’s consolidated earnings per share (EPS) would decline by only about 1.8%, indicating manageable downside risk.

Supporting this resilience is L&T’s strong order backlog, which stands at approximately $81 billion, reflecting a robust 30% year-on-year growth. Although new Middle East order inflows declined sharply in the third quarter, overall order inflows still grew 18% YoY. Additionally, domestic execution is expected to improve post-monsoon, providing further cushioning against external uncertainties and reinforcing the company’s medium-term growth outlook.

Larsen & Toubro Ltd (L&T) is one of India’s largest engineering and infrastructure companies, with a strong presence across construction, heavy engineering, defense, power, hydrocarbons, IT services, and financial services. The company executes large-scale projects in India and across the Middle East, Africa, and other global markets.  

It reported strong performance in Q3 and the first nine months of FY26, with order inflows and order book showing robust growth. Q3 FY26 order inflow rose 17% year-on-year to Rs. 1,356 billion, driven by solid domestic momentum, while 9M FY26 inflows increased 30% YoY to Rs. 3,458 billion. 

The company’s total order book grew 30% YoY to Rs. 7,332 billion as of December 31, 2025, compared to Rs. 5,642 billion a year earlier. International orders account for 49% of the total order book, reflecting L&T’s strong global presence. 

The company also highlighted its highest-ever quarterly order inflow, supported by a healthy prospect pipeline of around Rs. 5.9 trillion for the near term, indicating sustained growth visibility.

It reported a steady year-on-year performance in Q3FY26. Sales rose 10% YoY to Rs. 71,450 crore compared to Rs. 64,668 crore in Q3FY25. EBITDA increased 16% YoY to Rs. 9,190 crore from Rs. 7,898 crore, reflecting improved operating performance. Net profit declined 4% to Rs. 3,825 crore from Rs. 3,974 crore in the year-ago period. EPS declined 4% YoY to Rs. 23.37 from Rs. 24.43.

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