If you have a high tolerance for risk and want some exposure to the booming defence sector, then it could be worth considering the ASX stock in this article.
That's because Bell Potter believes it could rise more than 100% from current levels over the next 12 months.
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Which ASX defence stock?
The stock that Bell Potter is urging investors to buy is Titomic Ltd (ASX: TTT).
It is a $340 million cold spray technology company. It applies this technology in additive manufacturing and coating and repairs.
Bell Potter highlights that cold spray uses compressed gas to accelerate metal powders to supersonic speeds, enabling kinetic energy to fuse/plastically deform the particles onto a substrate in solid form. The company's high pressure systems can accept speciality alloy powders and manufacture large high-spec components.
The broker was pleased to see that the ASX stock has signed a contract with a leading US defence prime contractor. It said:
TTT has announced an Early Manufacturing Development (EMD) contract with a leading US defence prime contractor, valued at US$1.7m and expected to be completed by mid-2026. TTT will manufacture "next generation" defence sector components at its Huntsville Alabama facility. The contract leverages TTT's propriety Titomic Kinetic Fusion cold spray additive manufacturing capabilities.
The broker feels that while it is early days, the successful delivery of this contract could bring about further contracts. It explains:
While it is a relatively early stage proof of concept agreement, successful delivery could lead to qualification and low-rate initial production contracts. The "next generation" designation for "defence modernization initiatives" implies a high-end technology application. TTT has previously outlined defence markets to include hypersonic systems, satellites, munitions and launchers as key segments of the addressable market; hypersonics and satellites being the most advanced applications.
Big potential returns
According to the note, Bell Potter has retained its speculative buy rating and 50 cents price target on the ASX defence stock.
Based on its current share price of 23 cents, this implies potential upside of almost 120% for investors over the next 12 months.
Commenting on its speculative buy recommendation, Bell Potter concludes:
TTT provides leverage to the emerging application of its cold spray technology in AM for defence, aerospace and natural resources markets. US defence spending as a percentage of GDP is at a cyclical low and is expected to lift over the coming decade. NATO members have recently announced increased spending commitments. We expect news flow relating to TTT's participation in US defence programs, new commercial agreements and non-dilutive government-backed funding. We have made no changes to our earnings outlook or valuation in this report.
