The Australian sharemarket’s defence-focused stocks are experiencing a sustained boom, propelled by ongoing global conflicts that have escalated demand for critical components. Adelaide-based Codan has notably captured market attention, with its share price surging nearly 24 per cent in a single day following an announcement that it anticipates its December half-year profits to double. The company, which recently entered the S&P/ASX 100, supplies a radio frequency component, the size of a mobile phone, to drone manufacturers in the United States and Europe. This core technology has seen surging demand amid global conflicts. Codan’s shares have rocketed 120 per cent over the past year, positioning the company as a standout performer within the ASX defence sector.
This impressive surge aligns with a broader trend of increased global military spending, which reached a record US$2.9 trillion ($4.2 trillion) in 2025, according to the Stockholm International Peace Research Institute. Canaccord Genuity equity strategist Greg Burke noted that the rationale for investing in the defence sector “has rarely been stronger” due to elevated geopolitical risks. These include Russia’s war in Ukraine, the ongoing US-Iran conflict, and China’s military expansion. Other Australian companies benefiting from this trend include Electro Optic Systems, a developer of weapons and spacecraft technology, anti-drone group DroneShield, and defence technology player Elsight.
Andrew Mitchell, co-founder of Ophir Asset Management, holding a significant position in Codan, highlighted the lucrative impact of drones in modern warfare. Mitchell anticipates substantial contracts in the next 12 to 18 months, with Codan poised to capitalise as allies replenish stockpiles. He praised Codan’s technology as proven effective in Ukraine and more cost-effective than its main competitor. Separately, Mitchell also invested in ASX-listed shipbuilder Austal. While its share price has climbed about 30 per cent since May, it remains down over 45 per cent annually. Austal’s American division posted a loss last financial year due to a $175 million impairment from a US Navy contract. The company is now the subject of a $1.87 billion buyout bid for its US shipyards from Wildcat, potentially allowing Austal to focus on domestic expansion as Australia’s monopoly navy shipbuilder.
