It’s the new arms race: Who will be best equipped for war in the skies? The rise of drones, of course, makes the technology a major element of warfare, but there’s an equally important counter-trend emerging: new systems to detect, track, and disable them. Enter the anti-drone or counter-UAV industry.
It’s emerging as one of the more significant defense technology opportunities with many governments increasing their spending on airspace security, military infrastructure, and critical asset protection.
The market is anticipated to grow at a rapid double-digit pace in the years to come, as global geopolitical tensions rise and cheap drones continue to proliferate worldwide, posing risks to everything from airports to power plants.
This new arms race has brought a great deal of attention to companies producing radar, electronic warfare and advanced defense systems, as all play a role in developing anti-drone technology. In fact, it has come to the point that global defense experts say the growth in the anti-drone sector is one area that “could unlock significant growth potential and future development opportunities for the global defense market.” With that in mind, here are three defense tech stocks poised to ride the wave.
1. Bharat Electronics (BEL)
The giant Indian defence electronics company has exposure to radar, electronic warfare and communications systems, which is exactly what you need in the counter-UAV space. Defense forces the world over, for example, require early detection of incoming drones and that can be achieved through advanced radar systems and the company’s expertise in these areas.
Furthermore, India is actively focusing on enhancing its domestic defense manufacturing capabilities, so expect the government to order more indigenous technologies from BEL to beef up its security forces and state-run infrastructure.
It’s this large procurement opportunity that could drive significant growth in the company’s defense business, including for its anti-drone capabilities.
2. Astra Microwave Products
A large proportion of the components and technologies that make up advanced defense systems are developed by smaller, highly specialized firms. Astra Microwave Products fits this description.
The company manufactures RF (radio-frequency) and microwave systems used in radar, communications and electronic warfare technology, all components of any credible anti-drone system.
That’s especially true as drones are increasingly getting smaller, more elusive, and operating in swarms. The need to accurately track and engage them requires better sensors, which often use radar technology, an area in which Astra Microwave excels. This adds a growth catalyst for the stock that’s well-beyond what many expected just a few years ago.
3. Paras Defence and Space Technologies
India’s move towards self-reliance and domestic manufacturing of high-value defense and space technologies has been one of the biggest growth catalysts for local companies. Paras Defence is an integral part of this trend, with strong expertise in optical systems, defense electronics and engineering.
While it doesn’t offer a comprehensive counter-UAV solution like some western counterparts, Paras provides key components and technologies used in some advanced defense systems that can integrate with anti-drone capabilities.
Its strong relationships with Indian defense forces and growing product portfolio in key defense segments puts it in a strong position to benefit from increased procurement and technology development.
Why the Anti-Drone Industry Is Taking Off
The rationale for the boom in anti-drone technology is simple. Drones are becoming more sophisticated, cheaper, and easier to use than ever. This includes, for instance, “small UAS (unmanned aerial systems) capable of carrying payloads that range from surveillance and intelligence gathering equipment to explosives and chemical weapons.”
As a result, governments are heavily investing in solutions that can not only detect when an unauthorized drone enters airspace but also neutralize it before it causes any damage to a power grid, airport, military installation, or another strategic target.
Look for technologies like artificial intelligence, advanced sensor fusion, automatic target recognition, and innovative electronic warfare capabilities to become the foundation of future counter-drone systems.
The Investment Outlook
While the anti-drone market is still in its nascent stages, the long-term growth prospects look incredibly strong given the evolving global threat landscape. Companies like Bharat Electronics, Astra Microwave, and Paras Defence can offer investors access to various segments of this increasingly important part of the defense technology market. As with any defense investment, keep in mind that government orders, timelines for product deployment, and valuations can fluctuate. Still, as drones remain a fixture of the modern military and civilian landscape, the companies best positioned to stop them will likely reap significant rewards.
