L&T shares fall despite assurance of limited West Asia impact; Macquarie sees 'significant value'

Shares of Larsen and Toubro (L&T) Ltd. declined over 2% on Monday, March 23, as the company said 95% of its sites in West Asia remain unaffected by the ongoing Iran war.

Brokerage firm Macquarie is also positive on the stock as India's largest infrastructure company provided an update on its exposure to West Asia, impact of the Iran-Israel-US war on its business and the way forward.

Macquarie has an "overweight" rating on L&T with a price target of ₹4,910 per share, indicating an upside of 42.8% from its previous close. It said the L&T stock has corrected 22% over the last month and it sees significant value at the current level.

L&T said it has a presence in Saudi Arabia, UAE, Qatar, Kuwait, Oman and other regions in the Gulf.

The infrastructure company said it has 100 sties operating in the region, including all segments, of which 95% of the sites in West Asia are business as usual, and that 5% of the sites are suspended or disrupted.

Macquarie said the 5% sites are stalled by the company or client due to risk factors such as proximity to a military base, etc. The stalled 5% sites currently did not contribute significantly to its revenue, it added.

L&T went on to add that logistics and supply chain pose as a challenge as supplies from China and Europe have been disrupted. It added that it is not facing any collection-related issues.

Macquarie said L&T's deputy managing director flagged logistics and supply chain as the key challenges and highlighted revenue risk including deferment, if the situation does not resolve in three months. The company generally keeps three-month supplies at site.

L&T said its future opportunities include:

L&T has a significant exposure to West Asia. As much as 3.6 lakh crore of 49% of the company's consolidated order book was from its international business. Of this, over 80% came from Saudi Arabia, UAE and the Gulf region. The L&T stock has been among the worst-performing large-cap stocks this month.

Of the 34 analysts who have coverage on the stock, 28 have a 'buy' rating, four have a 'hold' rating and two have a 'sell' rating.

L&T shares were down 2.1% at ₹3,365.2 apiece just after market open on Monday. The stock has declined 23.8% in the past month.

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