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FAQ: Stonegate Capital Partners Coverage Update on Electro Optics Systems Holdings Ltd (ASX: EOS) - 3Q 2025
TL;DR
EOS gains strategic advantage by acquiring counter-drone technology and securing a $125M HELW contract, positioning itself to capture 50% of the high-power laser weapon market.
EOS's counter-drone system uses onboard imaging, infrared seekers, and AI-based guidance, with the HELW capable of neutralizing 20 drones per minute without cool-down constraints.
EOS's advanced counter-drone technologies enhance global security by providing more efficient protection against drone threats, contributing to safer airspace and defense systems worldwide.
EOS's high-power laser weapon can destroy 20 drones per minute, operates without cool-down periods, and integrates with vehicle-mounted systems for mobile defense applications.
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The update focuses on EOS's recent acquisition of a UK-based interceptor business, significant defense contracts for counter-drone technology, strong order backlog, and growth outlook in the defense sector.
EOS acquired the UK-based interceptor business from MARSS Group for A$10.0M, which adds complementary counter-drone capability that is expected to take 12-24 months of further development.
EOS secured an A$125.0M contract for a 100kW high power laser weapon system (HELW) for counter-drone warfare, which can take down 20 drones per minute and is 5-10 times more efficient than current kinetic kill options.
The HELW system is approximately 5-10 times more efficient than current kinetic kill options and does not have the constraint of cool down time, making it significantly more effective for counter-drone warfare.
EOS has a strong order backlog over AUD$400.0M, which is almost 3 times higher than it was at year end, with most expected to be monetized in 2026 and 2027.
Stonegate's DCF analysis values EOS at AUD$8.16 to AUD$9.56 with a midpoint of AUD$8.79, while Comparable Analysis values it at AUD$7.09 to AUD$9.75 with a midpoint of AUD$8.42.
EOS has a three-pronged approach focusing on counter-drone RWS technology over the next 1-3 years and HELW technology over the next 2-5 years, with significant macro tailwinds from the EU's ReArm Europe Program.
The system pursues targets with onboard imaging, an infrared seeker and market-leading AI-based guidance, is compact and mobile for fixed sites and vehicle deployment, and can integrate with common sensors and command systems.
Revenues from the A$125.0M HELW contract are expected to be recognized over the next 3 years, with the contract expected to be accretive to margins and cash flow positive in the back half.
EOS believes it is poised to capture 50% of the HELW total addressable market given its proprietary technology and first mover advantage in the counter-drone weapons space.
Curated from Reportable
