The Electro Optic Systems Holdings Ltd (ASX: EOS) share price is racing higher on Wednesday morning.
At the time of writing, the defence and space systems company's shares are up 4% to $1.88.
Why is the EOS share price rising?
Investors have been bidding the company's shares higher today after it announced a new contract win.
But before we cover that, let's dig a little deeper into what Electro Optic Systems actually does.
The company has two segments, Defence Systems and Space Systems.
Defence Systems specialises in technology for weapon systems optimisation and integration, as well as ISR (Intelligence, Surveillance and Reconnaissance) and C4 systems for land warfare.
The company notes that its key products include next-generation remote weapon systems, vehicle turrets, high-energy laser weapons (directed energy), as well as fully integrated and modular counter-UAS and C4 systems.
The Space Systems segment includes all EOS space and communications businesses. It operates as two entities – Space Technologies and EM Solutions.
The Space Technologies business specialises in applying EOS-developed optical sensors and effectors to detect, track and characterise objects in space. Whereas the EM Solutions business delivers RF and optical space communications technology.
What was the announcement?
Today's announcement relates to the Space Systems segment.
According to the release, the Space Technologies business has secured a $9 million contract with the Australian Defence Force Joint Capabilities Division to further develop space capabilities.
Management believes that this project is a significant strategic opportunity for EOS and is consistent with its stated strategy of securing third party funding for new capability development work in Space Technologies.
The project is expected to be delivered in the second half of 2024 and 2025.
It is also worth noting that the new contract is in addition to a $5 million contract with the Australian Defence Force Joint Capabilities Division that was announced to the market in April.
No further details were provided about the arrangement.
Should you invest?
Analysts at Bell Potter see value in the EOS share price at current levels.
Earlier this week, the broker retained its buy rating and $2.20 price target on its shares. It commented:
EOS continues to perform well and the market's focus will now turn to growing the orderbook in CY25 and beyond. Near-term opportunities for the company include the conditional contracts with Ukraine and on-going negotiations with Hanwha in relation to the supply of RWS to the Land 400 Phase 3 project in Australia. Our $2.20 price target is unchanged and remains a >15% premium to the current share price so we retain our BUY recommendation.
