Defence sector has been evoking the interest of the investors for high growth stocks. Australia is spending, as percentage of GDP, ~2% or ~$49 billion annually on Defence. It is likely to increase after the release of Australian Government’s 2024 National Defence Strategy (NDS) and the 2024 Integrated Investment Program (IIP).
Prominent among growing companies to invest in is
DroneShield Limited (ASX: DRO)
DroneShield Limited (ASX: DRO) has reported strong performance for the first three quarters of 2024, with cash receipts reaching a record $30.5 million, marking a 20% increase from the same period in 2023. The company’s revenue for the period was $31.1 million, a slight decrease compared to $39 million in 2023, mainly due to significant deliveries made in 3Q 2023 from a major order. However, DroneShield expects its full-year 2024 revenue to hit $55.2 million, driven by scheduled deliveries from existing orders, with an additional $24.1 million estimated in Q4. The company also has a strong inventory value of $240 million, which helps meet customer needs quickly, particularly given the urgent nature of demand.
DroneShield's sales pipeline is robust, with a total of $1.1 billion in potential opportunities as of late October 2024. The company is seeing strong demand, particularly in the Asia-Pacific region, where governments are ramping up their counter-drone systems in response to security concerns. The U.S. remains DroneShield's largest market, contributing 60% of revenue so far in 2024. In Europe, the company’s relationship with NATO is expected to lead to significant sales, while Ukraine’s ongoing conflict continues to drive demand for counter-unmanned systems (C-UxS). DroneShield's extensive product range and ability to deliver quickly are key factors that position the company for success, with several high-value contracts potentially being awarded by the end of the year.
DroneShield finished September 2024 with a strong cash balance of $238.3 million, up from $145.5 million in June 2024. The increase includes proceeds from a $120 million placement and reflects careful management of cash flows, including investments in inventory. The company plans to invest heavily in R&D to stay ahead of drone technology innovations, as well as expand its inventory to meet growing demand. With no debt or convertible securities, DroneShield is well-positioned for continued growth and expansion, particularly as it scales its manufacturing capabilities. It has also expanded its Sydney facility to increase production capacity from $400 million to $500 million per year, supporting the anticipated demand for its products in 2025 and beyond.
Moving forward, DroneShield continues to innovate and adapt to the rapidly evolving drone threat landscape. While its core customers are currently military organizations, the company expects the civilian sector to increasingly adopt counter-drone technologies, particularly in response to incidents involving drones. The company is also moving towards a C-UxS-as-a-Service model, offering customers hardware refreshes, software updates, and field support on longer-term contracts. DroneShield’s strength lies in its ability to rapidly innovate in a fast-changing market, supported by a large engineering team and strong relationships with key customers. The company remains one of the only publicly listed pure-play C-UxS companies and is positioned to continue leading the sector as it grows.
Source: Company’s Report
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