Electro Optic Systems Holdings Ltd (ASX: EOS) shares are starting the week with a bang.
In morning trade, the ASX defence stock is up 17% to $10.28.
This means its shares are now up over 600% since the start of the year.
Image source: Getty Images
Why are EOS shares rocketing?
Investors have been bidding the company's shares higher again on Monday after it announced another major contract win.
According to the release, EOS has secured a contract for the delivery of Remote Weapon System (RWS) for the Australian Defence Force (ADF) LAND 400-3 Project.
It notes that the contract is valued at a total of $108 million and its customer is Hanwha Defence Australia, which is the prime contractor to the ADF on LAND 400-3.
The contract includes RWS, spare parts, training, documentation and other items. The contract is expected to be primarily fulfilled by EOS during 2025, 2026 and 2027.
Management highlights that under this contract, EOS will deliver an enhanced R400 RWS which has been designed, configured and tested to suit specific ADF requirements and will be fully integrated with Hanwha's Redback Infantry Fighting Vehicle (IFV). The product will be manufactured in Canberra, Australia and will draw upon the company's extensive Australian supply chain of over 100 manufacturers.
The ADF's LAND 400-3 Project is designed to procure a total of 129 IFVs for the Australian Army.
Should you invest?
Last week, the team at Bell Potter spoke very positively about the company and boosted their valuation of EOS shares materially.
In response to big drone news out of the European Union, the broker said:
EU Defence Commissioner Andrius Kubilius says the bloc will build a "drone wall" along the eastern flank, integrating detection, tracking and interception to counter hostile UAVs. After recent airspace violations, EU defence ministers agreed to move from "discussion to concrete action", with a shared drone-detection network targeted within about a year, followed by deeper layers over time. Further details are expected at early-October EU meetings in Copenhagen and Brussels.
It then adds:
EOS is positioned as a market leader in counter-UAS solutions, in particular directed energy, and is fully leveraged to increases in defence budgets globally magnified by higher spending allocations to counter-drone technology. The EU "drone wall" is one such example underscoring the critical need for counter-UAS. We see positive news flow over the next 6 months stemming from counter-UAS and RWS contract awards.
Bell Potter currently has a buy rating and $11.00 price target on EOS shares. This appears to suggest that it isn't too late to jump on board this high-flyer.
