Counterdrone Co. Has Strong Sales Pipeline
Research Report

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Disclosures for Shaw and Partners, DroneShield Ltd., February 25, 2025

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On February 25, 2025, Shaw and Partners analyst Abraham Akra maintained a Buy rating on DroneShield Ltd. (DRO:ASX; DRSHF:OTC) with an unchanged price target of AU$0.90, citing improved revenue visibility and a strong sales pipeline that supports the company's growth outlook in the counter-drone solutions market.

DroneShield has released its FY24 annual report, with revenue visibility for FY25 improving to AU$52 million in February 2025, up from AU$45 million in January 2025. While the company experienced slower-than-expected revenue growth in CY24 due to tender delays, it has built a record sales pipeline of AU$1.2 billion, reflecting increasing global demand for counter-drone solutions. The sales pipeline has shown significant gains in the European Union and Australia, though declines were observed in Asia/Other, the United States, and the United Kingdom. Despite the shifts, Asia/Other remains the largest pipeline region, anchored by an AU$228 million Japanese project.

The company continues to expand its global footprint with several notable contract wins, including an AU$9.7 million contract in Latin America, an AU$8.2 million NATO award, and AU$11.8 million in agreements in the Asia-Pacific region. DroneShield is well-positioned to benefit from increased defense expenditure under NATO and AUKUS initiatives.

Project LAND 156 represents a significant strategic opportunity, valued at AU$300-500 million, which is not included in the existing AU$1.2 billion pipeline. This project involves designing and integrating systems capable of countering NATO Class 1 and 2 drones. DroneShield's combination of hardware and software expertise, supported by Australian sovereign capabilities, positions it strongly for this opportunity.

The global counter-drone market is projected to reach US$7 billion by 2030, growing at a CAGR of 30.2% from 2023 to 2030. The analyst notes that "recent incidents, such as surging drone-related security breaches, highlight the mounting demand for effective counter-drone technologies."

Key risks for DroneShield include counterparty risk related to international business, supply chain challenges that could cause delivery delays, the uncertainty of government contracts, product liability concerns, potential changes in government legislation, and data security vulnerabilities.

For FY24, DroneShield reported sales of AU$58.0 million, representing 7.2% growth, with an EBITDA of negative AU$8.1 million and an NPAT of negative AU$0.3 million. The analyst forecasts significant improvement in FY25, with projected sales of AU$93.5 million (+61.2%), EBITDA of AU$15.4 million, and NPAT of AU$3.2 million.

With the current share price at AU$0.78, the AU$0.90 price target represents a 15.4% potential upside.