The team at Shaw and Partners have run the ruler over AML3D Ltd (ASX: AL3) shares after a major contract win, and they like what they see.
The broker is predicting more than 100% upside for the ASX technology company's shares, which we'll get to shortly.
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Major new contract win
Firstly, let's look at what they announced this week.
AML3D said they had received a $9.9 million order for four Arcemy X 3D printing systems from US shipbuilder Newport News Shipbuilding, which is a division of HII, which is the largest US military shipbuilder.
AML3D Chief Executive Officer Sean Ebert said it was a major milestone for the company.
The step change in the size and value of this HII ARCEMY order is very much reflective of the strong and growing demand signals that underpin AML3D's continued expansion into the U.S. defense market. It is also a strong endorsement of our U.S. 'Scale up' strategy which included establishing our U.S. technology Center in Stow Ohio and our plans to invest $12 million to expand our U.S. production capabilities. Not only do we expect to see a continued growth in U.S. defense orders we are also looking to continue to expand into other sectors. We have already successfully supplied ARCEMY technology to the Tennessee Valley Authority, the largest public utility in the U.S., and are targeting growth across the U.S. Marine, Energy, Aerospace and Oil & Gas sectors. In addition, we are seeing the emergence of early-stage demand in our UK and European markets that is similar to the demand signals that are driving our success in the U.S.
Shares looking cheap
Shaw and Partners said the new order supports their projection for FY27 revenue at AML3D of $30 million.
They added:
AL3 is set for growth with U.S. reshoring initiatives, strengthened by key partnerships including the U.S. Navy and Boeing.
And they said more announcements were likely:
AL3 has been in discussions with the US Navy/BlueForge Alliance around an A$23mn "Phase 2" expansion of additive manufacturing capacity in the Navy's supply chain. This is likely to involve 10 ARCEMY systems and could be framed by a "take or pay" agreement with the Navy to supply printed components. The contract depends on appropriation of funding under the National Defense and Authorization Act FY26. We believe funds may be made available for this arrangement over the next month catalysing AL3 to make an announcement at that time.
Shaw has a price target of 40 cents on AML3D shares, compared with just 17 cents currently. AML3D was valued at $93.9 million at the close of trade on Tuesday.
