Electro Optic Systems Holdings Ltd. (ESO:ASX) acquired MARSS' interceptor drone business for AU$10 million (AU$10M), paid entirely with cash reserves, reported Bell Potter Analyst Baxter Kirk in a Nov. 26 research note. Bell Potter lowered its target price on the Australian defense manufacturer by 19% after assigning it a lower 2026 enterprise value:EBITDA multiple (50x versus 70x) to reflect heightened geopolitical risk.
"Given recent political/industry attention and contract awards for this vertical, we view this acquisition favorably, further leveraging Electro Optic Systems to the global counter-unmanned aircraft system (C-UAS) thematic," Kirk wrote.
76% Return Implied
Bell Potter's new 12-month target price on Electro Optic Systems is AU$8.10 per share (AU$8.10/share), previously AU$10, Kirk noted. At the time of his report, the company was trading at about AU$4.61/share, reflecting a return to target of 76%.
Electro Optic Systems remains a Buy.
The company has a market cap of AU$890M. Its 52-week range is AU$0.99–10.42/share.
Company Has C-UAS Portfolio
Electro Optic Systems operates in the defense and aerospace industry, specializing in advanced weapon systems, counterdrone technologies and space control products for military customers around the world. The company has offices on four continents and employs about 400 people, including engineers, technicians and management.
With this acquisition, "EOS is positioned as a market leader in C-UAS solutions and is leveraged to increasing budget allocations to C-UAS technologies," noted Kirk.
Hard-Kill C-UAS Technology
The analyst explained that interceptor drones are the latest development in hard-kill C-UAS technology and have been shown to be effective against loitering munitions in Ukraine. Interceptors are fast and agile, have a 5 kilometer range that is further than that of remote weapon systems, are more effective than jamming and are more affordable than rockets and missiles. In C-UAS operations, interceptor drones are seen as alternatives to high-cost, missile-based effectors like Patriot missiles. Interceptors can complement other counterdrone technologies such as jamming, kinetic and directed energy in a multilayered approach.
For Electro Optic Systems to fully commercially launch its interceptor drone, it will take another one to two years of development and an ongoing investment of up to AU$10M over the next three years, reported Kirk. Once ready, the company intends to position the product as a lowest-cost solution, at US$10,000 per unit (US$10K/unit). This compares to competitors' products, priced at US$50–60K/unit.
"We believe this is the right strategy for EOS given the importance of cost asymmetry in warfare, however, believe that low-cost competitive threats are likely to appear given the revenue opportunity available," Kirk added.
Competitors in Interceptor Space
Electro Optic Systems claims that its interceptor can defeat Class 1 and Class 2 drones and damage or defeat Class 3 drones, depending on speed, Kirk pointed out.
The analyst listed these companies as Electro Optic Systems' key competitors with interceptor drones:
- Anduril (U.S.): The company's Anvil is a small autonomous quadcopter interceptor designed to ram into Group 1 and Group 2 drones. The U.S. Army evaluated the Anvil in November.
- Fortem Technologies (U.S.): The company's DroneHunter systems intercept drones by firing a net at them. Fortem received multiple orders in Q3/25 from Europe, the Middle East and Africa for 12 DroneHunter systems.
- Origin Robotics (Latvia): The company's product is the BLAZE interceptor. In November, Belgium agreed to purchase BLAZE as part of a larger €50M C-UAS package.
- Merops program (NATO): Merops, a mobile C-UAS system developed under the U.S.-based Project Eagle, uses the Surveyor interceptor drone. The Surveyor is said to have shot down more than 1,000 Shahed drones in Ukraine.
Electro Optic Systems' competitors with missile-based C-UAS solutions are:
- RTX Corp. (RTX:NYSE), formerly Raytheon Technologies (U.S.): The U.S. awarded RTX a US$5 billion contract for its Coyote at about US$100K/unit.
- AeroVironment Inc. (AVAV:NASDAQ) (U.S.): In October, the U.S. awarded AeroVironment a US$96M contract for its Freedom Eagle-1 at US$150–200K/unit.
Positive Catalysts on Horizon
Looking ahead, Kirk noted that based on Electro Optic Systems having been awarded the AU$20M Slinger contract in November that Bell Potter's full-year 2026 (FY26) revenue forecast of AU$293M is 59% secured by announced contracts. If EOS receives at least one laser contract next year, then there is material upside to Bell Potter's revenue forecasts for FY27 (AU$312M) and beyond.
"We see positive news flow over the next six months, stemming from C-UAS and remote weapon system contract awards," Kirk wrote.
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