L&T shares rebounded to pre-conflict levels; buy, sell or hold? Target price

Nuvama Institutional Equities has downgraded Larsen & Toubro Ltd (L&T) to ‘Hold’, as the stock has almost rebounded to pre-conflict levels, even as supply challenges are likely to persist into the June quarter. The domestic brokerage said nearly 95 per cent of L&T's West Asia sites operated normally through March but a prolonged closure of Strait of Hormuz may add to logistic costs and potential raw material shortages in the June quarter. For now, the brokerage is building in core execution growth of 18 oer cent for Q4FY26, translating into 13 per cent growth for FY26. 

L&T shares closed at Rs 3,953 on Monday. Nuvama set a revised target of Rs 4,400 on the stock against 4,850 earlier, still suggesting 11.30 per cent potential upside. 

L&T, which  is up 14 per cent in the past one month, hit a high of Rs 4,032 on April 8. The scrip settled at Rs 4,278.30 on February 27 and the US-Israel joint strikes on Iran started on February 28 (March 2 closing: Rs 4,066.70).  

For the June quarter, Nuvama expects L&T to report 7.9 per cent year-on-year (YoY) rise in net profit at Rs 5,931 crore on 10.6 per cent YoY rise in sales at Rs 82,290 crore. Order inflows for the quarter are seen at Rs 92,303 crore and total order book at Rs 7,39,238 crore. Nuvama sees Ebitda margin at 11.4 per cent in Q4 compared with 10.4 per cent in Q3 and 11 per cent in the year-ago quarter. 

"Q4FY26 is likely to report relatively robust execution as L&T pushes to achieve its 15 per cent YoY revenue growth guidance, after a relatively softer 9MFY26 performance of 12.8 per cent
YoY. Execution in the quarter could also be supported by a renewed thrust in the water
segment following the announcement of Jal Jeevan Mission 2.0," Nuvama said. 

The key risk, it said, appears to be shifting into Q1FY27. 

"A prolonged blockade of the Strait of Hormuz could disrupt raw material availability with inventory buffers potentially starting to run down April onward while any further escalation in the conflict may also trigger labour shortages through worker exodus. Beyond FY27, however, the medium-term setup remains materially constructive," Nuvama said.

This, it said, would be led by a record order book of Rs 7.3 lakh crore, which translates into 3 times trailing sales.  It also sees a potential fresh layer of opportunity from West Asia reconstruction.