• Several ASX companies could benefit as the Federal Government commits to improving Australia’s defence capabilities
  • Bell Direct reckons the Defence Strategic Review puts Droneshield and XTEK in prime position as providers to ADF 
  • Federal Government has committed to work with Australian industry as it works to improve six Defence priority areas

Release of the Defence Strategic Review is considered the most significant Defence report since WWII.   With six priority areas it is expected to shape the country’s Defence policy and national security posture for decades to come.

While the exact costs of implementing recommendations in the review have not been released, it is expected spending on Defence will rise from the current ~2% of GDP equating to ~$49 billion annually.

Also in a positive sign, the Federal Government has made a commitment to work with Aussie industry as it works to improve the country’s defence capabilities. So which ASX stocks could benefit?

READ: Spotlight on ASX defence stocks following Australia’s most significant defence review since WWII

ASX Defence stocks:

Swipe or scroll to reveal the full table. Click headings to sort.

Code Company Sub-sector Market cap
ADA Adacel Technologies Airspace control $12.37 million
AJX Alexium International Group Military equipment $51.47 million
ASB AUSTRAL Shipbuilding $607 million
BCT Bluechiip Military equipment $19.79 million
BIS Bisalloy Steel Group Military equipment $94 million
BRN Brainchip Holdings Military equipment $707 million
CDA Codan Military equipment $1.26 billion
DRO Droneshield Drones $175 million
ELS Elsight Drones $48.85 million
EOS Electro Optic Systems Satellites/space $95.89 million
KSS Kleos Space Satellites/space $20.04 million
MX1 Micro X Bomb detection $46.42 million
MOB Mobilicom Ltd/Australia Military Equipment $12.66 million
OEC Orbital Corp LTD Drones $17.57 milllion
QHL Quickstep Holdings Military Equipment $21.52 million
TTT Titomic Military Equipment $27.28 million
XTE XTEK LTD Drones/Military Equipment $44.81 million
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Modern warfare – Robotics and drone technology

Since Russia first invaded Ukraine in February 2022, images of warfare have much resembled past wars including tanks, warships, fighter planes, guns, grenades and boots on the ground.

But as Professor of Anthropology at San José State University Roberto J. González pointed out, there’s another side to the conflict.

He described it a “hypermodern battleground where drones play a crucial role in surveillance, reconnaissance and combat missions”.

“These technologies may foreshadow a world in which armed conflicts are conducted largely by remote control – and perhaps someday, by artificial intelligence,” he said.

There are several Australian ASX companies operating in the unmanned aircraft or drone space.

Droneshield (ASX:DRO) has AI based platforms for protection against advanced threats such as drones and autonomous systems.  The market for counter-drone tech is expanding rapidly and projected to be worth US$3.8 billion by 2027 with a CAGR of ~28%, driven by rising international tensions and security breaches.

DRO has several contracts with police and military customers in Australia and New Zealand, the European Union, and US and with civilian and airport agencies.

Bell Direct market analyst Grady Wulff told Stockhead DRO has been going from “strength-to-strength” in recent times following the announcements of a number of some key contracts being won including two $11m contracts in December 2022 and January 2023.

“From a results perspective, CY22 was a pivotal year for DRO with the company closing in on profitability, reporting a significant improvement in cash, lower-than-expected operating expenses and revenue driven by a record order backlog of $24m in cash receipts,” she said.

Wulff said the Defence Strategic Review places DRO in a prime position to further enhance its footprint as a provider of key assets for the ADF,  in particular the second of six priority areas which is to develop the ADF’s long-range strike capability and the domestic manufacture of munitions.

Elsight (ASX:ELS) has developed the Halo drone communication technology system enabling unmanned aircraft to fly beyond the visual line of sight (BVOS).

ELS’s platform was designed to address the demanding requirements of special forces across enemy lines and sophisticated intelligence organisations.

The company has a range of customers from Defence and homeland security to industrial security, broadcasting, first responders, healthcare and retail.

XTEK (ASX:XTE)  is a Defence industry company operating as two distinct divisions – ballistics and technology. The ballistics division is based on its “HighCom Armor” brand and is focused on designing, manufacturing and supplying global military, law enforcement and first responder customers with personal protection ballistic products.

XTE’s cutting edge military tech division supplies UAV and UGV solutions, detection and optical payloads, 3D mapping and modelling software along with tactical situation awareness software.

XTE counts the the Australian Defence Force among its customers.

Wulff said it’s another company that could be in line to benefit from the Defence Strategic Review.

“The review places XTE in the prime position to work with the ADF to achieve the key point in the review of lifting capacity to introduce disruptive new tech into ADF capability, in close partnership with Australian industry, given XTE’s existing infrastructure and operational capacity,” she said.

She said the H1 FY23 for XTE delivered very strong results compared to the prior-corresponding-period (PCP). Revenue exceeded Bell Potter guidance at $48.5m, up 321% on PCP.

“The company has also recently experienced gross margin improvement, up 27.1% on the PCP, as revenue in the first half was largely driven by higher margin sales in the ballistics division,” she said.

“Given XTEK’s existing contract with the ADF for $26.9m to supply an unspecified amount of Small Unmanned Aerial Systems (SUAS), the strategic review now opens further doors for contracts to be extended and new orders to be placed.”


The DRO, ELS & XTE share price today:



Military equipment positions for growth

Among the most established ASX companies operating in the defence sector is shipbuilding company Austal (ASX:ASB). ASB operates ship yards in five countries including Australia, China, Philippines, the US and Vietnam and counts Twiggy Forrest as a substantial shareholder with a 19% stake.

ASB hasn’t been without its controversies, divulging in April that former execs based in the US were accused and charged of manipulating financial information.

“The United States Department of Justice (DOJ) has indicted three former Austal USA employees for allegedly making or causing to be made false and misleading statements about Austal USA’s performance and financial condition between 2012 and 2016, and the US SEC also announced that it has filed civil charges against the same three individuals,” said in an announcement.

Brainchip Holdings (ASX:BRN) is a smart sensor analytics company whose products cover several markets, including video analytics, speech and speaker recognition.

BRN’s tech can also be applied to autonomous vehicles and unmanned aerial surveillance drones.

A leader in cold cathode X-ray technology Micro-X (ASX:MX1) produces a range of range of portable X-ray systems, most commonly used in healthcare applications such as aged care homes and military or humanitarian field hospitals.

But apart from the medical sphere, MX1 is also looking to commercially launch its bomb detection Argus X-ray camera in the next couple of months.

Bisalloy Steel Group (ASX:BIS) produces different types of steel including armour plate for Australia’s ballistics, defence, naval, vehicles market and for overseas customers.

BIS said its Australia’s only processor of quenched and tempered high strength, abrasion resistant and armour grade alloyed steel plates. BISALLOY ARMOUR  steel is used to support Australia’s defence forces while BISALLOY PROTECTION steel has been designed to protect “life, valuables and property”.

Aerospace company Electro Optic Systems (ASX:EOS) is involved in space defence.  The company’s defence systems include laser physics, advanced optics, precision control systems, space domain sensors and communications technologies, and remote operated combat vehicles.

EOS earlier this month announced it had won a contract with SpetsTechnoExport (STE), a Ukrainian state-owned foreign trade enterprise, to supply up to 100 EOS heavy RWS units to Ukraine, including spares and related services.

The contract, worth around $120 million over 2023-24, is conditional on demonstration testing over the coming weeks, and subject to other customary terms for military contracts.

Nevertheless, investors seem confident with its share price up ~40% in the past month.


The ASB, BRN, MX1, BIS &  EOS share price today:


Are we missing any stocks in this story? email [email protected]

At Stockhead, we tell it like it is. While Elsight, is a Stockhead advertiser, it did not sponsor this article. 

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.