Kernex Micro to benefit from Rail Budget 2010: Emkay

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"Rail Budget 2010-11, presented by Union Railway Minister Ms Mamta Banerjee, through the 2020 vision, laid the roadmap for long term plans of railways. The railways has set an ambitious target of adding 25,000 km new lines over the next 10 years (2500 km / year as against last 5 years average of mere 219 km / year). While higher reliance on Public Private Partnership (PPP) model should help in achieving these optimistic targets, low provisions for funding and slow execution remain key concerns.

Broadly, it remains positive for the industry with no increase in freight rates. Industries like cement, power, metals to gain, since industry was worried about increase in freight rates. Rail companies like Kalindee, Hind Rectifiers, Texmaco, BEML, Kernex etc should benefit from 2020 vision, target of 1000 km new track in next year, gearing up execution on Dedicated Rail Freight Corridor (DRFC) in longer run, while opportunities in near term remained subdued due to lack of clear guidelines and execution capabilities.

Gross traffic receipt is estimated to increase by 4.3% driven by 6.1% growth in freight loading volumes and 8.6% growth in passenger earnings. Despite increase in gross earnings, net margins are likely to remain stable at ~8% with insignificant increase in internal accruals. As a result, dependency on external sources of funding is likely to increase" says Emkay Research report.

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