The L&T stock has been battered lately on concerns about its exposure to West Asia. The share price of L&T corrected over 10% in two days. However, it is seeing some buying today. The domestic brokerage house Motilal Oswal has reiterated its ‘Buy’ rating on this capital goods major, Larsen & Toubro (L&T) and set a target price of Rs 4,400 for the stock. This suggests an upside potential of around 16% from the current market price.
One of India’s largest engineering and construction companies, Larsen & Toubro operates across infrastructure, energy, information technology services, and manufacturing. Although the brokerage house remains optimistic about the company’s long-term growth outlook, it also pointed out that certain near-term challenges could influence performance.
According to the brokerage report, the investment case around Larsen & Toubro is gradually evolving. It noted that the company is moving from a traditional “sum-of-the-parts” valuation approach to more of a “moving parts” investment thesis, given the multiple business segments and the changing global environment.
Let’s take a look at the key reasons why the brokerage house is bullish on this capital goods stock and what is the rationale behind it –
Motilal Oswal on Larsen & Toubro: Strong order book continues
One of the key reasons behind the brokerage’s positive stance is Larsen &Toubro’s large and diversified order book.
According to the brokerage report, international projects form a significant portion of the company’s business. They have highlighted that at the end of 9 months in FY26, the international order inflows has been around Rs 1.54 trillion and the order book stood at Rs 3.8 trillion, with the Middle East accounting for 75% of its international order book.
Over the past few years, overseas contracts have contributed a large share of revenue for the company.
The report noted that international inflows contributed to 51%, 57% and 53% of total inflows in FY24, FY25 and the first nine months of FY26 respectively. Meanwhile, international revenue accounted for 34%, 44% and 50% of total revenue during the same period.
The Middle East remains a major market for Larsen & Toubro, particularly in sectors such as hydrocarbon projects, renewable energy, and transmission infrastructure.
However, the brokerage also cautioned that geopolitical developments in the region could affect project execution in the short term.
Motilal Oswal on Larsen & Toubro: Domestic orders provide some cushion
While international projects dominate the order book, domestic business has started showing signs of recovery.
According to the brokerage report, domestic order inflows remained largely flat between FY23 and FY25. However, growth has picked up in FY26, driven by projects in thermal power, buildings and factories, domestic refineries, and metals.
The report stated that domestic order inflows rose by 29% year-on-year during the first nine months of FY26 to Rs 1.35 trillion.
Furthermore, the brokerage firm in its report noted that the company expects opportunities to expand its presence in several domestic sectors, particularly infrastructure and private industrial projects.
Motilal Oswal on Larsen & Toubro: IT business faces pressure from artificial intelligence
Another key factor influencing Larsen & Toubro’s valuation is the performance of its information technology subsidiaries.
According to the brokerage report, a large portion of the company’s sum-of-the-parts valuation is linked to its information technology businesses, which are currently facing industry-wide uncertainty.
The report stated, “IT sector revenue faces direct exposure to AI-driven productivity/displacement risk, with incremental pressure from third-party software efficiencies and automation layers.”
The growing use of artificial intelligence in software development and services could affect growth prospects for the broader information technology services sector. As a result, valuations of IT subsidiaries may face some pressure.
Motilal Oswal on Larsen & Toubro: Near-term challenges remain
Motilal Oswal also highlighted certain risks that could affect the company’s performance over the near term.
The brokerage said, “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.”
Because of the evolving global environment, the brokerage has slightly adjusted its valuation assumptions. “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 target price of Rs 4,400.”
Motilal Oswal on Larsen & Toubro: Key risks investors should watch
According to the brokerage report, several factors could influence Larsen & Toubro’s future performance. These include slower order inflows, geopolitical uncertainties, delays in large infrastructure projects, a sharp rise in commodity prices, and higher working capital requirements.
While the company continues to benefit from a strong order pipeline and improving domestic demand, the global environment and technological changes remain key factors to monitor in the coming quarters.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.