Watchlist #6- Kernex Microsystems
- 14 hours ago
- 3 min read
With Watchlist we pen down our broader thoughts on an idea that looks interesting and is worth keeping in one’s watchlist. This week’s idea is Kernex Microsystems.Kernex deals primarily in railway safety & signaling systems. It is one of the three approved vendors for indigenous TCAS system- Kavach.
Kavach as a theme has seen periods of ups & down over last 4-5 years and within that Kernex’s positioning has also changed many times.
The theme started picking up in 2022 when the initial set of orders starting coming out for companies after nearly a decade of development.
In 2022, Kernex got ~Rs500 crores worth of orders which was massive given the fact that at that time Kernex was ~Rs250 crore market cap company with ~Rs20 crore annual revenues.
Then for the next 2-years the theme went into lull as there were no new orders that were awarded vs the earlier expectations of sustained order flows.
Since Kernex did not have any other business compared to other peers like HBL, 2023-2024 was a lull period for Kernex’s stock.
Then towards the mid of 2024, the theme again picked up as a massive ~Rs8000 crore order was put out for tendering for 10,000 Kavach loco units along with multiple tenders for track & station kavach.
Kernex got ~Rs2000 crore worth of order for 2500 locos in this 10,000 loco order, which was even higher than what its larger peer HBL got.
But the theme again went into lull in 2025 as the execution for the 2024 orders looked uncertain due to delay in approval from Railways end for the Kavach 4.0 version; all the three approved vendors were earlier approved for Kavach 3.2
Kernex’s positioning again became worse as it got the approval for Kavach 4.0 at the very last vs its other two peers and very near to deadline of Dec’25 which is when the 2500 loco order was due for execution. As a result, Kernex was not able to executed on this order, resulting in cancellation of this large order.
Whereas the larger peer HBL who got approval much earlier in the year was able to execute a decent chunk of its order.
Now in 2026, things have again picked up for the theme. Tenders for ~11,429 loco units worth ~Rs9000 crores have been floated plus the unexecuted part of earlier 2024 order of 10,000 loco units is also expected to come out for retendering and could be worth another ~Rs5600 crores. So, a total of ~Rs15,000 crores worth of orders are to be awarded.
Kernex now again has an upper hand as it has won ~Rs2400 crore worth of order for 3024 loco sets recently, while the larger peer HBL did not win any. So earlier ~Rs2000 crore order got cancelled but now Kernex has won an even larger order.
Further, there is still ~12,000 loco orders (including re-tendering of unexecuted 2024 order) worth ~Rs9700 crores still to be awarded along with more track & station Kavach orders.
Kernex currently has an order book of ~Rs3700 cores which includes recently won Loco order and track orders won in 2025. Of the pending ~Rs9700 crore worth of loco orders, Kernex should get atleast ~Rs2000 crores and that would bring Kernex’s total order book to >Rs5500 crores which is quite massive vs company’s current mcap of ~Rs2000 crores.
Kernex already has built up inventory for its 2024 loco order which it was not able to deliver due to late approval and has stated in a press release that it would use that inventory for execution of the recently won order. And thus, execution should happen quickly here.
Readers who want to a bit more primer on Kavach as a theme and on Kernex can access our research report on it here-
In summary, after multiple periods of ups & downs, Kavach as a theme and Kernex’s positioning in it has now again turned positive and that makes it a good opportunity to keep track of.
That’s all for this one; we’ll be back with a new idea next week. Meanwhile readers can access some of our more detailed research and resources here;
Shared Research 🔗- https://www.surgecapital.in/sharedresearch
Knowledge Base 🔗- https://www.surgecapital.in/knowledge-base
Comments