Graphic: Ahmed Raza Khan/Mint

With an order book that’s around 2.6 times annual revenue, a slight drop in order inflows doesn’t make much difference. More importantly, as IIFL Capital points out, “This is the highest order intake in a quarter for the company. The fact that it comes without help from large orders points to a gradual recovery in the capex cycle, and bodes well for FY11 order inflow outlook."

L&T shares had nearly trebled in the three months between March 2009 and June, but have since been flat even though the markets have risen gradually. One of the reasons for this was the markets’ worry about execution risk. Revenue in the first three quarters was far lower than what the street had estimated, because of a delay in the financial closure of certain projects. Analysts expect orders to translate into revenue at a healthier pace in the coming quarters, thanks to the improvement in business sentiment and liquidity conditions. Still, valuations are rich at around 31 times 2009-10 earnings. According to Kotak Institutional Equities, earnings are estimated to grow at an annual average rate of around 21% between FY10 and FY12.

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