Larsen & Toubro (L&T) shares have seen a significant rebound, climbing 14 percent over the past month and nearing their pre-conflict highs. Despite this recovery, Nuvama Institutional Equities has revised its rating on the infrastructure giant from 'Buy' to 'Hold', citing ongoing supply chain challenges expected to persist into the June quarter of 2026.
Strait of Hormuz Poses Supply Chain Risks
The downgrade comes as L&T's stock approaches levels seen before the US-Israel joint strikes on Iran began on February 28, 2026. While approximately 95 percent of L&T's West Asia sites operated normally through March, Nuvama warns that a prolonged closure of the Strait of Hormuz could lead to increased logistic costs and potential shortages of raw materials in the coming months. Inventory buffers are anticipated to begin running down from April onwards, shifting key risks into Q1 FY27.
Nuvama's revised target price for L&T is Rs 4,400, down from an earlier projection of Rs 4,850, though it still suggests an 11.30 percent potential upside from its recent closing price of Rs 3,953.
Q4 FY26 Outlook and Financial Projections
For the fourth quarter of fiscal year 2026, Nuvama projects L&T to report a net profit of Rs 5,931 crore, marking a 7.9 percent year-on-year (YoY) increase. Sales are estimated to rise by 10.6 percent YoY to Rs 82,290 crore. The brokerage anticipates order inflows for the quarter to reach Rs 92,303 crore, contributing to a robust total order book of Rs 7,39,238 crore. EBITDA margin is expected to improve to 11.4 percent in Q4, up from 10.4 percent in Q3.
Nuvama noted that Q4 FY26 is likely to show strong execution as L&T pushes to meet its 15 percent YoY revenue growth guidance for the full fiscal year, following a softer performance in the first nine months. Renewed focus on the water segment, spurred by the Jal Jeevan Mission 2.0, is also expected to support execution.
Long-Term Potential Remains Constructive
While near-term risks from geopolitical tensions, including potential labor shortages due to worker exodus if the conflict escalates, are acknowledged, Nuvama maintains a materially constructive medium-term outlook for L&T beyond FY27. This positive view is underpinned by the company's record order book, which translates to three times its trailing sales, and potential new opportunities arising from reconstruction efforts in West Asia.