Kernex Microsystems (India) Limited

Technology — Software - Application · NSE

₹1,769.70+₹51.90 (+3.02%)

DalalBaazaar Score

74 / 100

🟢 Good

Verdict

REASONABLE

Risk

Moderate

Driven by negative free cash flow, micro-cap size, which brings thin liquidity.

In simple words: Strong business and financial position, with both sales and profits growing well. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:07 pm

Mixed / neutral. No major red flags jump out, but nothing here screams "obviously cheap" either. This is a name that needs a peer comparison and a view on near-term earnings triggers before sizing a position.

Understanding the Business

Company site ↗

The 60-second version of Kernex Microsystems (India) Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Kernex Microsystems (India) Limited, together with its subsidiaries, engages in the manufacture and sale of safety systems and software services for railways in India, Egypt, the United States, and internationally.

IndustrySoftware - Application

SectorTechnology

Employees609

Annual revenue₹430 Cr

How does it make money?

Turns over ₹430 Cr a year. Of every ₹100 of sales, about ₹21 reaches shareholders as profit, with ₹30 left at the operating level before interest, tax and depreciation. Each of its 609 employees supports ₹70.6 lakh of revenue a year, the signature of a people-led business.

EBITDA margin30.4%

Net margin20.5%

Revenue / employee₹70.6 lakh

Who are its competitors?

The closest listed comparisons in its industry are TATA CONSULTANCY SERV LT, INFOSYS LIMITED, HCL TECHNOLOGIES LTD, WIPRO LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

TATA CONSULTANCY SERV LTP/E 17.3x · ROE 45.6%

INFOSYS LIMITEDP/E 15.8x · ROE 32.0%

HCL TECHNOLOGIES LTDP/E 20.4x · ROE 24.6%

WIPRO LTDP/E 14.5x · ROE 15.9%

What is its competitive advantage?Some evidence

ROCE of 46.8% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

ROCE46.8%

ROE35.6%

Peer median ROE32.0%

What has been driving growth?

Growth has come mainly from selling more, rather than from keeping more of each sale. Over 3 years revenue moved +10550% while net margin moved -104% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+10550%

Margin effect-104%

DalalBaazaar Score

74/ 100

Good

Weighted across six categories. Every point is explained below.

✓ Beta of -0.02 — historically steadier than the index
✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✗ Profits have swung sharply from year to year — earnings are hard to forecast
✗ Negative free cash flow means dependence on external funding

Quality vs. Valuation

Company Quality

81/ 100

Excellent

How good the business is, ignoring the share price entirely.

Valuation

60/ 100

Fair

What you are being asked to pay, ignoring how good the business is.

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

15.6x

1.3Y Median

37.8x

16 monthly readings · mean 42.5x · range 28.6x–76.5x

Sector Median

16.5x

median of 4 sector peers

🟢Current valuation is approximately 59% below its 1.3y median of 37.8x. Cheaper than its own history, which is worth a reason too: the market may be pricing in something the backward-looking numbers do not show.

🟡Against its sector it is priced broadly in line with the peer median of 16.5x.

vs. its own history

Cheap

37.8x median over 16 months · -59%

vs. sector peers

Fair

16.5x median of 4 peers · -6%

vs. generic bands

Fair

15x–35x

P/E (Trailing)

15.6x

P/B

11.96x

EV/EBITDA

24.0x

PEG

—

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well5

Margins are improving
EBITDA margin is up from -374.6% to 30.4% over 3 years.
Return on equity is rising
ROE has improved from -24.1% to 35.6%.
Return on capital is rising
ROCE has improved from -20.9% to 46.8%.
High return on capital employed
ROCE of 46.8% is the mark of a business that converts capital into profit efficiently.
Valuation below its historical average
At 15.6x the stock trades 59% below its own median of 37.8x.

🔴 What Needs Attention2

Debt is rising
Total debt is up 1415% over 3 years — worth checking what it funded.
Free cash flow is negative
The business is not currently covering its capital spending from operations.

Red Flags

3 items require attention · 2 high · 1 watch

🔴Debt has risen sharplyFinancial
Total debt is up 1415% over 3 years, from ₹11 Cr to ₹162 Cr.
🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹114 Cr in the latest year.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 46.8% means each rupee reinvested earns well above what capital costs. If the company can keep deploying at this rate, growth creates value rather than just consuming cash.
Margin expansion has further to run
EBITDA margin has risen from -374.6% to 30.4%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Priced below its own history
The stock trades 59% below its own median multiple. If the business performs as it has and simply re-rates back to normal, that gap is return on its own.

🔴 Bear CaseWhat could go wrong?

Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.
Several serious flags at once
2 high-severity checks triggered. Individually each has an explanation; together they raise the chance that something structural is wrong rather than a one-off.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1Revenue growth stays above 281% a year✓ 374.0% CAGR
Latest reported year was 800.4%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 28%✓ 30.4%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹114 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 1.2x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 44%✓ 46.8%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

9 / 11 checks passed

✓ Strong return on equity (ROE ≥ 15%)
✓ Strong return on capital employed (ROCE ≥ 15%)
✓ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✓ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✗ Short-term technical trend isn't bearish

Price history

Quick Metrics

5 good · 4 neutral · 2 weak

Market Cap

₹2,974 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

15.6x

Fair

Fairly valued against the generic band

P/B Ratio

11.96x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹113.53

Profitable

Profitable on a per-share basis

ROE

35.6%

Strong

Strong capital efficiency

ROCE

46.8%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.66x

Moderate

Moderate leverage

Revenue Growth (YoY)

800.4%

Healthy

Healthy top-line growth

Profit Growth (YoY)

1372.3%

Healthy

Profits growing at a healthy clip

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

-₹114 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹1,769.7

Operating Margin

31.9%

Good

Healthy core-business profitability

Net Margin

21.7%

Good

Strong bottom-line conversion

Current Ratio

1.31

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

-0.02

Defensive

Steadier than the market

52W Range Position

53%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

1729.9 / 1831.3

Bearish alignment (short < long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

56.1

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹4 Cr	₹20 Cr	₹190 Cr	₹430 Cr	+374.0%
EBITDA	-₹15 Cr	-₹18 Cr	₹38 Cr	₹131 Cr	—
EBITDA Margin	-374.6%	-91.7%	20.2%	30.4%	—
PAT (Net Profit)	-₹20 Cr	-₹26 Cr	₹50 Cr	₹88 Cr	—
EPS	₹-14.64	₹-16.61	₹29.95	₹52.71	—
ROE	-24.1%	-24.8%	31.8%	35.6%	—
ROCE	-20.9%	-23.0%	21.9%	46.8%	—
Total Debt	₹11 Cr	₹28 Cr	₹40 Cr	₹162 Cr	+147.4%
Free Cash Flow	-₹37 Cr	-₹76 Cr	₹6 Cr	-₹114 Cr	—

🟢 Revenue has grown at 374.0% a year over 3 years.

🟢 EBITDA has turned positive, from -₹15 Cr to ₹131 Cr.

🟢 EBITDA Margin has risen from -374.6% to 30.4% over 3 years (+405.0 pts).

🟢 PAT (Net Profit) has turned positive, from -₹20 Cr to ₹88 Cr.

🟢 EPS has turned positive, from ₹-14.64 to ₹52.71.

🟢 ROE has risen from -24.1% to 35.6% over 3 years (+59.7 pts).

🟢 ROCE has risen from -20.9% to 46.8% over 3 years (+67.7 pts).

🔴 Total Debt has grown at 147.4% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹919 Cr

Total Liabilities

₹672 Cr

Total Debt

₹162 Cr

Cash & Equivalents

₹1 Cr

Operating Cash Flow

-₹100 Cr

Capex

-₹15 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

36.8%

Corporate Actions

Ex-Dividend Date

20 Sept 2012

Peer Comparison

Company	P/E	ROE
TATA CONSULTANCY SERV LT	17.3x	45.6%
INFOSYS LIMITED	15.8x	32.0%
HCL TECHNOLOGIES LTD	20.4x	24.6%
WIPRO LTD	14.5x	15.9%

Recent News

2 mixed4 general

Kernex Microsystems (India) Share Price Target 2027 to 2030: Anal

Univest, 17 AugAnalyst view

🟡Mixed / dependsBroker commentary — an opinion about the price rather than new information about the business.

If EPS Growth Is Important To You, Kernex Microsystems (India) (NSE:KERNEX) Presents An Opportunity

Simply Wall Street, 17 May

Kernex Microsystems (India) Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 30 Aug

Kernex Microsystems - FIIs more than doubled their stake in these 11 multibagger stocks. Do you own any?

The Economic Times, 10 Aug

Kernex Microsystems soars 18% in weak market; zooms 106% in 2 months

Business Standard, 29 May

Kernex Microsystems Share Extends Decline on Profit Booking After Doubling in Value Across Three Months

HDFC Sky, 19 JunPrice move

🟡Mixed / dependsA price move rather than a change in the business. If the figures on this page have not moved, the fall is either an opportunity or news they have yet to catch up with.

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🟢Business QualityStrong17.9/20

🟡Financial HealthAdequate11/20

🟢GrowthStrong18.4/20

🟢ProfitabilityStrong13.5/15

🟡ValuationFair9.1/15

🔴RiskHigh4/10

Good business at a fair price

A sound business at a reasonable valuation. Suitable for a long-term holding, with the valuation and the direction of margins worth watching rather than the business itself. 2 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓Revenue growth stays above 281% a year374.0% CAGR
✓EBITDA margin holds above 28%30.4%
✗Free cash flow remains positive-₹114 Cr
✓Debt / EBITDA stays below 2x1.2x
✓ROCE stays above 44%46.8%