DroneShield Ltd. (DRO:ASX; DRSHF:OTC) reported its Q2/25 and H1/25 financial results, after which Bell Potter upgraded its rating on the Australian counterdrone solutions company to Buy from Hold, reported Analyst Daniel Laing in a July 30 research note.
"DRO's strong H1/25 results (unaudited), high-level of contracted revenue (AU$176.3M) and recent share price pullback provides us with increased confidence in its near-term outlook and, in our view, a more attractive entry point," Laing wrote.
20% Upside Implied
Bell Potter maintained its AU$3.80 per share 12-month price target on DroneShield, noted the analyst. At the time of Laing's report, the company was trading at about AU$3.17 per share. From this price, the return to target is 20%.
DroneShield has a market cap of AU$2.77 billion (AU$2.77B). Its 52-week price range is AU$0.59–4.10 per share.
Improved Cash Flow
The highlight of DroneShield's latest results was improved H1/25 cash flow, which exceeded Bell Potter's estimates, Laing reported. Operating cash outflow was (AU$4.4 million [AU$4.4M]) versus (AU$25.5M). Investing cash outflow was ($11.9M) versus ($16.7M). Both were a beat, in large part due to higher customer receipts and lower inventory than had been projected.
The Australian counterdrone solutions company ended Q2/25 with AU$203.7M in cash.
As for revenue in Q2/25, it was AU$38.8M, up 480% year over year. In H1/25, it was AU$72.3M, a 220% increase over H1/24, consistent with Bell Potter's forecast of AU$71.3M.
Significant Orders, Pipeline
The outlook for DroneShield is bullish, wrote Laing. As of July 22, the company had secured AU$176.3M in revenue for delivery this year. For context, this represents about 90% of Bell Potter's full-year forecast of AU$195.4M. As of July 24, the company had AU$192M in cash.
The company's sales pipeline is robust at an estimated value of AU$2.3B. Of these opportunities, 43% are in Europe, and 29% are in the U.S.
"DroneShield is well-positioned to continue its strong performance," wrote Laing.
Forecasts Unchanged
Bell Potter updated its H1/25 revenue, interest, cash flow and working capital forecasts but made no other changes, noted Laing. For H1/25, its estimates are revenue of AU$72.3M, EBITDA of AU$5.7M and net profit of AU$3.9M.
The financial services firm's earnings per share forecasts are 3.5c in 2025, 5.6c in 2026 and 7.1c in 2027.
Why DRO is Compelling
Laing outlined his four-point investment thesis on DroneShield. One is valuation.
The second is strong demand, which the company is poised to meet, having scaled up its operations and invested heavily in building its inventory.
The third is structural growth in the market. Geopolitical conflicts are causing countries to boost their defense budgets materially. Drone/antidrone defense is one of the fastest growing subsets of the growing military market.
The fourth component is DroneShield's opportunity for expansion into adjacent markets.
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