DroneShield Ltd (ASX: DRO) shares are starting the week with a bang.
In morning trade, the counter drone technology company's shares are up over 11% to a new record high of $3.09.
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Why are DroneShield shares rocketing?
Investors have been bidding the company's shares higher this morning after it announced the expansion of its research and development (R&D) capabilities.
According to the release, DroneShield is making a more than $13 million initial investment via a multi-year lease and fitout commitment into a brand new 3,000sqm production facility in Sydney's Alexandria. It is expected to open in December 2025.
The company points out that this is in addition to 2,500sqm of R&D area in its headquarters, expanding its own annual production capacity to $900 million by mid-2026 and a combined total annual manufacturing capacity to $2.4 billion by the end of 2026.
Why is it expanding its capabilities?
This investment is part of its plan to target a $2.34 billion and rapidly growing global sales pipeline including in Europe, its fastest-growing export market.
The $13 million amount refers to five years of initial lease commitment as well as the fit-out cost for its expanded R&D area, and the new production facility.
The company highlights that as DroneShield engages with third party supply chain, substantially Australian, there is no requirement for heavy machinery and similar capital expenditure investment.
The new facility, including advanced in-house production, testing and warehousing capabilities is DroneShield's largest to date and more than three times the size of its current production floor near central Sydney.
The current production floor will be converted into an additional R&D area for the company, resulting in a 5,530sqm total R&D area.
Management notes that it comes hot on the heels of DroneShield announcing it has received a $61.6 million European contract in June. That was its largest single order in its history, followed shortly by a $9.7 million Latin American contract and an $11.7 million Five-Eyes R&D contract.
In line with the broader increase in military spending across the EU region, DroneShield has also announced its significant expansion into Europe, where it is planning to establish a European Centre of Excellence. This includes a manufacturing and production facility, to support the continent's domestic defence programs such as the 800 billion euros ReArm Europe Plan / Readiness 2030.
Commenting on the news, DroneShield's CEO, Oleg Vornik, said:
In response to rising threats and multiple wars taking place across the globe, Australia's allies are increasing investment in modern defence capabilities. We are stepping up to meet this demand by investing in state-of-the-art facilities here and abroad, and in sovereign Australian skills development to provide the most modern and effective counterdrone capabilities in the world. Our new facility in Alexandria will epitomise the value Australian engineering can bring to a changing geopolitical landscape.
DroneShield shares are now up 300% since the start of the year.
