Shares of Kernex Microsystems were locked in the 5% upper circuit at ₹327.60 apiece during Wednesday's trade. This bullish momentum has persisted over the last five trading sessions, with the stock consistently hitting the upper circuit limit, gaining nearly 21.5%.
This positive momentum has been bolstered by growing market expectations that the recent train tragedy in Odisha will lead to a surge in contracts for the 'Kavach system,' an automatic train protection system.
The incident, which took place on June 02, has sparked belief among many that the implementation of the 'Kavach system' could have potentially prevented the tragedy.
The 'Kavach system' is an advanced automatic train protection system that was developed by the Research Designs and Standards Organization (RDSO) in 2022. It was introduced as part of the Atmanirbhar Bharat initiative. The system acts as a safeguard or armor for trains, ensuring enhanced safety and preventing accidents.
The cost to develop Kavach is around ₹50 lakh per kilometer, compared to over ₹2 crore for the solutions that global players offer.
Kernex Microsystems is engaged in similar services, including the manufacturing and sale of safety systems, and anti-collision devices for railways, along with software services.
The company started developing railway safety systems in 1999 and successfully developed and demonstrated a prototype of ACDs to Konkan Railway Corporation Limited and members of the Railway Safety Board, as its website shows.
The Hyderabad-based technology company has secured orders worth ₹563 crore during the fiscal year 2022–23. Additionally, the company, in collaboration with KEC, received multiple letters of acceptance from the North Central Railway during September 2022, accounting for over ₹537 crore of orders to be executed within a timeframe of 650 days.
Furthermore, it has also been awarded a Letter of Award from Integral Coach Factory (ICF) in Chennai for ₹26.74 crore. This award entails the supply, installation, and commissioning of a Train Collision Avoidance System (TCAS) (also known as Kavach) for 39 units, with a targeted completion date of July 31, 2023.
"The FY2022–23 has been a landmark year for Kernex, wherein we secured a significant quantum of orders in a robust market, that is only expected to flourish, owing to the Indian government's resolve and continued efforts towards making railway journeys safer for millions of passengers," the company said in an exchange filing.
The company is well-positioned to benefit from the upcoming Kavach projects.
The Indian Railways, with its extensive 70,000-kilometre network, plans to implement Kavach across its infrastructure. This presents a significant opportunity for Kavach developers, including Kernex, with the potential to create opportunities worth ₹35,000 crore.
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