L&T recorded 24% growth in order inflows during FY09 to over Rs 520 billion while its order backlog grew 37% to Rs 742 billion, in line with estimates. We maintain our earnings forecast for FY10E with standalone earnings of Rs 41.8 and consolidated earnings of Rs 55.5 per share. We continue to believe that current environment poses risk to earnings estimates owing to challenges to order execution and order inflow momentum. L&T has witnessed appreciation in valuations with 1-year forward PER improving from 10.4X to 15.8X- fully factoring the inherent business model and the probable surprises in near term. We view this as an exit opportunity to re-enter at lower price points with attractive valuations, since we see limited upside.
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