This rail-related stock has zoomed 107% in 5 months; hits 15-year high

Shares of Kernex Microsystems (India) were locked at the 5 per cent upper circuit, at Rs 344, on the BSE on Tuesday. With this, they hit a 15-year high in an otherwise weak market. In the past five months, the stock price of the company has more-than-doubled, zooming 107 per cent on strong business outlook.

Kernex Microsystems is engaged in the manufacture, and sale of safety systems, and software services for railways. The stock was trading at its highest level since October 2007. Moreover, it inched towards its all-time high level of Rs 363, which it had hit on December 20, 2005.

In the past one month, the market price of Kernex Microsystems has appreciated by 28 per cent, as compared to 3.5 per cent decline in the S&P BSE Sensex.

Currently, Kernex Microsystems is trading under the T group on the BSE. In the T2T segment, each trade has to result in delivery, and no intra-day netting of positions is allowed.

On September 30, Kernex Microsystems informed that the North Central Railway has issued a letter of Acceptance (LOA) to Kernex-KEC consortium for the project viz, ‘Provision of KAVACH (Train Collision Avoidance System). The accepted bid project cost is Rs 254.86 crore, the company said.

Kernex has come close to completing the execution of the TCAS contract issued by South Central Railway in 2019. Indian Railways has been working actively to roll out TCAS (now renamed Kavach) across its network, starting with the Golden Quadrilateral routes.

“The Railway Board has advised and facilitated various Zonal Railways to issue tenders for Kavach. As many as ten tenders spanning 3000 Km, at a total project cost of Rs 1,500 crore were released by different Zonal Railways. These tenders are expected to be finalized soon and more tenders are expected to roll out in the months to come,” Kernex said in its FY22 annual report.

The company, with its expertise in designing, development and deployment of Train Collision Avoidance Systems in Indian Railways, and successfully completing the installation of automatic and semi-automatic Railway Gates in Egypt and Rail Safety project in South Africa, is better poised to grab new opportunities both domestically and internationally. Apart from these, the Company is pursuing the opportunities in the Yard Management where our TCAS systems are using.

There is a possibility of diversifying into Defense related work and manufacture of Electronic components and can undertake outsourced assembly work, Kernex Microsystems said.

However, the company is presently limited to operations in the strategic sector which has limited to Railway Sector. Though sustenance of the current levels of Business operations is not an issue, for posting a healthy growth year on year, there is a requirement to look for newer opportunities. “The company has initiated various proactive steps i.e. planning newer offerings in the existing portfolio and diversification of its product offerings. The rapid technological changes, competition from multi-national Companies and unfair domestic competition, change in Government policies are the threats,” Kernex Microsystems said in annual report.