MEDIUM TERM BUY -KERNEX MICRO

 KERNEX MICRO SYSTEMS

 BSE: 532686  NSE :KERNEX  CMP : 92.90

 MEDIUM TERM TARGET 129.00 

Kernex Microsystems was incorporated on September 15, 1991 as a private limited company with the object of designing, developing, installing and maintaining software packages for domestic and international markets. They are registered as 100% Export Oriented Unit (EOU) with Software Technology Parks of India, Department of Electronics, Govt. of India, New Delhi.

The company is presently engaged in the business of manufacturing, installing and maintaining of anti-collision systems as well as conceptualizing, designing, and developing certain railway safety and signal systems for Konkan Railways Corporation Ltd. These safety and signal systems are suitable for medium to low speed & density railway tracks like in India and other developing countries.

It entered into technology partnership with Konkan Railway Corporation Ltd, Navi Mumbai for design, engineering and development of anti-collision systems for providing safety to trains in Railways. It hold exclusive license for manufacturing, installation, commissioning and maintenance of anti-collision systems in India. The company also has an outsourced facility for the Konkan Railways Corporation Ltd. for manufacture and supply of ACDs and related accessories.

The company is a technology partner for the development and implementation of ADDs for Metro Sky-Bus Urban Transportation System, Advanced Railway Signal Systems and other safety systems. It holds the exclusive marketing rights of ACD systems all over the world except India.

Interesting indications coming in from Q4 results of the company. Q4 has contributed about 40% of the top-line of what the company has posted for whole of FY11. The bottom-line is about 45% posted alone in Q4. The company has given indications to execute 1,360 electronic gates projects for the Egyptian railway. The team from Egypt will come for inspection of the project in the month of June. They should be able to execute that order in next six months time. The second company is aggressively working on restoration and maintenance on the North frontier railways where they have fixed the anti-collision devices two-three years back. They are also working with their technology partner Konkan Railway for finalisation of version I and II of ACD. All of the restoration, maintenance and up-gradation of the anti-collision devices of version I and II are likely to get completed by October this year. The railway order for anti-collision devices would start flowing in from the month of October or maybe the year-end which will augment the top-line and bottom-line of the company over the next three-five years. The order size will be of about Rs 4,000-5,000 crore which will be spread over next seven years. The company is enjoying 40-45% of debt free status. All this can be a big trigger for the company, though investors have lost a lot of money. There has been a lot of time lag in the receipt of this order. The Egypt electronic gate order and anti-collision order expect to flow in from Indian Railway which will take the share on a different trajectory. In one year’s time, the share would move to about Rs 150.