Electro Optic System Holdings Limited (ASX: EOS) shares have shot higher in mid-afternoon trade following the company's announcement of its new, world-first, full-spectrum system for defence against attacks from unattended aerial system (UAS) or drones. This morning, the Electro Optic share price fell as low as $5.04 but, following the announcement at 12.30pm (AEST), the company's shares shot as high as $5.63. At the time of writing, the Electro Optic share price is trading at $5.31 representing a 2.9% gain for the day so far.
Product release
The new counter drone product (CUAS), named Mopoke, after the native Australia bird of prey, is used entirely for defensive systems. The ground-breaking product is focused on denial of attack capabilities presented in today's drones.
Mopoke, unlike other counter drones, consists of a wide range of capabilities that include radar sensors, drone interference technology, electronic and electro-optic sensors, command and control (C2) systems, and kinetic and laser weapons to destroy incoming threats.
CUAS market opportunity
Electro Optic is the only aerospace provider of a CUAS that can be deployed in both large-scale formations with all capabilities, and smaller-scale environments. The global defence contractor said that no competitor can match its CUAS in terms of offering more than four capabilities from a single source.
Industry market surveys and forecasts estimate the total addressable market for CUAS products to be US$48 billion by 2030. Electro Optic estimates that the CUAS market from its own customers is around US$21 billion.
Electro Optic has already been selected as a preferred provider for a major CUAS requirement. Contract negotiations with the mystery international customer have already commenced. The company expects its first phase of the contract to be completed over the next six months.
In addition, Electro Optic has initiated discussion with four other customers regarding its CUAS defence technology.
Management comments
Electro Optic CEO, Grant Sanderson, was upbeat about his company's newest product to fulfil a global market need. He said:
EOS customers suffered over US$20 billion in losses of critical infrastructure due to drone attacks in 2019. Globally this figure would be higher and the inestimable cost of drone attacks in human lives adds to these high economic costs.
EOS has applied its capability to manage complex systems to fast-track to production the most capable and coherent suite of counter-drone technologies in the world. The Mopoke suite offers several unique elements including the world's first proven directed energy (laser) kill system for drones, and the first overlapping capabilities in kinetic defence.
The EOS suite of capabilities is already being recognised in key markets where scalable performance is required to meet sophisticated asymmetric threats.
Is the Electro Optic share price a buy?
I think this the new product release presents a huge opportunity for Electro Optic to tap into this market. As the world advances forward with the use of drone technology, the need for counter drones is becoming increasingly apparent.
The company has been making strides this year with a raft of contracts. I believe the current Electro Optic share price does not reflect its robust growth profile for the near term. As such, I rate today's Electro Optic share price as a strong buy.
