Kernex Microsystems Set To Execute Over Rs 2,000-Crore Order In Next 12 Months

Kernex Microsystems (India) Ltd., fresh off winning a Rs 2,041.40-crore contract from Chittaranjan Locomotive Works, has outlined its roadmap for execution while projecting additional order inflows by the end of this fiscal.

"We were expecting this order for six months and have prepared our execution capabilities accordingly. Despite challenges, we are confident in our ability to deliver within 12 months," said Chief Operating Officer EB Rao.

The Rs 2,041-crore order, which exceeds Kernex's market capitalisation of Rs 1,910.83 crore, has boosted its shares to a 5% upper circuit in the two sessions after its announcement.

The contract involves supplying, installing, testing, and commissioning 2,500 onboard KAVACH safety systems at 17 different locations across South East Railway, Central Railway, South East Central Railway, and North Central Railway zones. While acknowledging the logistical and operational hurdles, Rao highlighted the steps taken to mitigate these challenges.

“Execution at multiple locations impacts profitability. If it were only about supply, margins would be higher. However, we expect Ebitda margins to remain around 20% with profitability in the 15-20% range,” he said.

To meet growing demand, Kernex has scaled up its production capacity significantly, from 1,200 units per year to 5,500 units, he said. Inspection and quality checks have been automated in order to accelerate delivery timelines. Rao added that the company has already bid for orders worth Rs 900-1,000 crore in station equipment tenders and expects decisions on these bids by March 2025.

Kernex reported a net profit of Rs 6.85 crore in the second quarter of this fiscal, reversing a loss of Rs 4.41 crore in the same period last year. Net sales also surged to Rs 41.22 crore from Rs 1.41 crore a year ago.

Kernex stock rose as much as 5% during the day to Rs 1,194.75 apiece on the NSE. It was locked in the upper circuit at 9:43 a.m.

It has risen 105.34% in the last 12 months and 107.01% on a year-to-date basis. Total traded volume so far in the day stood at 0.4 times its 30-day average. The relative strength index was at 78.40.