If you are looking for exposure to the defence sector and already own DroneShield Ltd (ASX: DRO) shares, then it could be worth checking out the ASX stock in this article.
That's because the team at Bell Potter is bullish on it and sees strong potential returns ahead for investors with a high tolerance for risk.
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Which ASX defence stock?
The stock in question is AML3D Ltd (ASX: AL3).
It is a welding, metallurgical science, robotics, and software business, which produces automated 3D printing systems that utilise wire additive manufacturing technology (WAM) to produce metal components and structures.
Bell Potter was pleased to see the ASX defence stock announce new contract wins. This includes an order from the US Navy. It said:
AL3 recently announced $12.5m in new orders, including a $9.9m follow-on order from Newport News Shipbuilding (four ARCEMY X systems) and a $2.6m parts manufacturing order for the US Navy. NNS is a subsidiary of major US defence prime contractor Huntington Ingalls Industries Inc (NYSE: HII), market capitalisation US$14.5b), is AL3's largest order to date and complements two ARCEMY X systems acquired by NNS in October 2025.
The US Navy order through BlueForge Alliance is for five high-demand submarine components which are no longer supported by the incumbent manufacturer. BlueForge Alliance is an industrial base integrator for the US Navy.
This comes at a time when the company's balance sheet is looking particularly strong. It adds:
AL3's balance sheet is strong with cash of $31m and no debt at 31 December 2025. We have incorporated AL3's latest financial results and the new orders into our outlook. The net result is tempering our revenue expectations for FY26, and upgrades to outer years.
Shares tipped to rocket
According to the note, Bell Potter has reaffirmed its speculative buy rating and 40 cents price target on the company's shares.
Based on its current share price of 21 cents, this implies potential upside of 90% for investors over the next 12 months.
Commenting on its recommendation, the broker said:
AL3's technology is particularly suited to maritime applications, giving it strong leverage into demand growth from the US Navy's Maritime Industrial Base and the US SHIPS Act. Over FY26-27, we expect AL3 to increase deployment of ARCEMY systems to the US and Europe, increase prototyping activity and ultimately commence commercial scale production of components.
There is potential for the Navy LOI to expand beyond the Maritime Industrial Base to land-based assets. AL3 will also look to deploy its technology into non-defence sector industrial manufacturing.
