Increasing global tensions have prompted economies to ramp up their defence spending, putting Defense Industry Stocks into the limelight. Advances in weaponry conflicts is also bringing best defense sector stocks to the fore. With Defence expenditure for Australia likely to be on the rise, ASX investors are looking forward to Defense Stocks to Invest in.
DroneShield Limited (ASX: DRO)
DroneShield Limited, based in Australia, specializes in advanced radio frequency sensing, artificial intelligence, and electronic warfare.
DroneShield Limited gained prominence in Defense Stocks List having demonstrated outstanding performance and growth over recent years. Revenue has surged from $1.2 million in 2018 to $55.1 million in 2023, with the first half of 2024 marking a record high with $24.1 million, reflecting a 110% increase from $11.5 million in 1H2023.
Customer cash receipts have similarly grown, from $1.8 million in 2018 to $73.4 million in 2023, and up by 40% from $15.3 million in 1H2023 to $21.4 million in 1H2024. The company also achieved its highest-ever first-half-year cash receipts.
SaaS revenue has expanded dramatically from $38 million in 2018 to $1,282 million in 1H2024, representing a 93% increase from 1H2023.
The company reported a profit of $9.3 million in 2023, a turnaround from a loss of $6.3 million in 2018. Net cash flow from operating activities was $10.46 million in 2023.
DroneShield boasts a robust cash balance of $146 million as of 30 June 2024, with no debt or convertible securities. DroneShield's strong financial health and operational effectiveness, positioning it well for continued growth and success.
DroneShield’s diversified growth strategy is backed by strong market projections. The US remains the largest market for the company, accounting for approximately 70% of its 2023 revenues. The company serves a growing customer base across various government agencies, including both military and non-military federal agencies, indicating its wide reach and adaptability.
DroneShield Limited is one of the Best Defense Stocks currently as it is experiencing significant momentum and expansion, underscored by a robust and growing sales pipeline now exceeding $1.1 billion, which has doubled in the past three months. The company is currently fulfilling $28 million in contracted sales orders, reflecting strong operational performance.
DroneShield is expanding its Sydney facility and supply chain network, increasing its manufacturing capacity from $400 million to approximately $500 million per annum. The recent signing of a NATO Framework Agreement is expected to drive significant orders from European markets, further enhancing DroneShield's global presence and strategic partnerships.
Austal Limited (ASX: ASB)
Austal Limited achieved a notable turnaround in EBIT, moving from a loss of $4.8 million in FY23 to a profit of $61.3 million in FY24, an improvement of $56.5 million.
Austal Limited, compatible with defence production, is poised for growth with a solid pipeline of opportunities, as it transitions to larger programs with improved cost inflation protections and enhanced labor hour metrics per vessel. The company’s USA division has secured new contracts totalling $1.4 billion during FY2024, including LCU and EMS contracts, and has also achieved a $779 million contract modification for the construction of the lead ship of the T-AGOS (ocean surveillance) program, T-AGOS 25.
Moreover, Austal has signed a Heads of Agreement with the Commonwealth of Australia to establish a Strategic Shipbuilding Agreement (SSA). If finalized, this agreement would designate Austal as the Commonwealth’s strategic shipbuilder at Henderson, Western Australia, thereby securing a long-term order book for the shipyard and reinforcing its future growth prospects.
Currently, the company boasts a record order book of around $12.7 billion, surpassing its total revenue from the past 7 years. At the 7-year average EBIT margin, this substantial order book has the potential to generate over $600 million in EBIT. Furthermore, there is significant upside potential as major programs progress to the steady-state phase, which could further enhance profitability.
Austal Limited has bolstered its growth through strategic investments. Over the past 12 months, the company's contract awards and options have increased by $1.1 billion, reaching a total of $12.7 billion. This impressive order book positions Austal strongly in the USA, where it supports Navy and Coast Guard shipbuilding and maintenance needs. The commercial contracts secured by Austal in the past six months are set to keep Australasian yards busier in FY2025 compared to FY2024. The company is also exploring further growth opportunities through AUKUS, particularly in submarine modules and technology, which are expected to enhance its portfolio in these strategically important areas.
Source: Company’s Report
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