- JPMorgan keeps Overweight rating on L&T, cuts target price to Rs 4,570 from Rs 4,780
- Execution of L&T projects remains stable despite Middle East geopolitical tensions
- Risk of prolonged conflict in Strait of Hormuz may delay project execution timelines
JPMorgan has maintained its 'Overweight' rating on Larsen & Toubro (L&T) but cut its target price to Rs 4,570 from Rs 4,780, factoring in emerging risks from the ongoing Middle East conflict. Despite the revision, the brokerage continues to see favourable risk-reward after the recent correction in the stock.
The brokerage noted that execution across L&T's projects has largely remained unaffected despite escalating geopolitical tensions. This is a key positive, given the company's meaningful exposure to the Middle East through its international order book.
However, JPMorgan cautioned that while current operations remain stable, the situation is evolving and warrants close monitoring.
A major overhang, according to the brokerage, is the risk of a prolonged conflict and continued disruption in the Strait of Hormuz, a critical shipping route. Any sustained closure could impact the movement of equipment and materials, potentially delaying project execution timelines. This remains one of the most significant downside risks for L&T's international business.
Near-term Impact Uncertain But Manageable
JPMorgan highlighted that quantifying the near-term financial impact remains challenging, given the fluid nature of the conflict. That said, the brokerage believes the impact appears manageable at this stage, with no immediate need for sharp estimate cuts.
The assessment suggests that while risks are rising, they have not yet materially altered the company's earnings trajectory.
Following the recent decline in L&T's stock price, JPMorgan believes valuations have turned more reasonable, improving the overall investment case. The brokerage described the current setup as offering a favourable risk-reward, particularly for investors with a medium-term horizon.
UBS has also maintained its 'Neutral' rating on the stock and lowered its 12-month target price to Rs 4,150 from Rs 4,500. The new target implies an upside of 7%.
ALSO READ: L&T Target Price Cut: Goldman Sachs Expects Slower Gulf Execution, Margin Pressure
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