AML3D LIMITED (ASX: AL3)

defense

Jul 16, 2025

1. Fundamental Analysis

Financial Performance Overview

AML3D has demonstrated exceptional revenue growth in recent years, with FY2024 revenue reaching AUD 7.32 million, representing a remarkable 1,055% increase from FY2023's AUD 0.60 million1 2. This growth trajectory continued into H1 FY2025, where revenue increased 206% to AUD 4.63 million compared to the prior corresponding period3 4. The company's "US Scale-up" strategy has been the primary driver, with 95% of FY2024 revenue coming from US customers1.

Revenue composition shows a strategic shift from contract manufacturing to systems sales, with 61% of FY2024 revenue (AUD 4.44 million) derived from ARCEMY system sales, while 36% came from component manufacturing and alloy testing contracts2. This transition to a recurring revenue model through systems sales, licensing fees (AUD 150k p.a.), and maintenance contracts (AUD 50k p.a.) provides enhanced revenue predictability5.

Profitability and Margins

Despite strong revenue growth, AML3D remains loss-making with a net loss of AUD 4.17 million in FY2024, though this represented a 23% improvement from the prior year2. The company achieved a gross margin of 67.53%6, demonstrating strong pricing power and operational efficiency. However, EBITDA remains negative at AUD 3.31 million loss in FY2024, though 31% improved from the prior year2.

The company's operating margin is currently -37.97% and net profit margin is -38.80%6, reflecting the early-stage nature of the business and significant investment in US expansion. Analysts forecast the company will achieve EBITDA positive by FY20275.

Cash Flow and Financial Position

AML3D maintains a strong balance sheet with AUD 32.1 million in cash as of December 31, 2024, following a successful AUD 30 million equity raise3 4. The company's free cash flow was -AUD 6.07 million in the last 12 months, with operating cash flow of -AUD 4.56 million7 6.

The company has minimal debt with a debt-to-equity ratio of just 0.058 9, providing significant financial flexibility for growth investments. AML3D's current ratio of 7.76 and quick ratio of 7.32 indicate strong short-term liquidity9.

Valuation Metrics vs Peers

AML3D trades at a P/E ratio of -29.5x (negative due to losses) compared to the machinery sector average of 9.6x10 11. The company's Price-to-Sales ratio of 13.9x is significantly higher than the peer average of 2.1x12, reflecting growth expectations. The EV/Sales ratio of 11.01x compares to global machinery industry average of 1.6x12.

Price-to-Book ratio stands at 3.99x versus sector average of 1.5x10, indicating a premium valuation. Analysts have set price targets averaging AUD 0.38 (38.9% upside from current levels) with a consensus BUY rating12.

Insider Ownership and Trading

Insider ownership represents 32% of shares outstanding, valued at approximately AUD 4.8 million13 14. This level of insider ownership demonstrates strong management alignment with shareholders. Recent director transactions show mixed activity, with some selling by CTO Andrew Sales (AUD 1.05 million at AUD 0.15 per share) but also option issuances to key executives15 13.

The company's substantial shareholder base includes Regal Funds Management with 5.51% ownership14, providing institutional support.

2. Thesis Validation

Bullish Arguments

1. Dominant Position in High-Growth Market
AML3D operates in the metal 3D printing market, which is projected to grow at a CAGR of 24.6% to reach USD 87.33 billion by 203416. The broader additive manufacturing market is expected to reach USD 88.28 billion by 2030 at a 23.3% CAGR17. AML3D's Wire Arc Additive Manufacturing (WAAM) technology offers superior deposition rates and 80% material savings compared to traditional methods18.

2. Strategic US Defense Positioning
The company has established critical relationships with the US Navy and BlueForge Alliance, securing multiple contracts including a AUD 2.27 million Tennessee Valley Authority contract and ongoing submarine component manufacturing4 19. The Manufacturing License Agreement with BlueForge Alliance provides long-term access to US Navy supply chains20 21. With US defense spending projected to reach USD 931.6 billion by 202822, AML3D is well-positioned to capture significant market share.

3. Scalable Business Model Transition
AML3D's shift from contract manufacturing to systems sales creates recurring revenue streams through annual licensing fees (AUD 150k) and maintenance contracts (AUD 50k)5. This "sticky" revenue model provides predictable cash flows and higher margins, with systems effectively requiring annual software payments to remain operational5.

Counter-Arguments and Key Risks

1. Extended Path to Profitability
Despite strong revenue growth, AML3D remains significantly loss-making with negative operating margins of -37.97%6. The company is not expected to achieve profitability until FY20275, requiring continued cash consumption and potential dilution risk. Current free cash flow burn of AUD 6.07 million annually7 necessitates careful capital management.

2. Valuation Premium and Competitive Threats
Trading at 13.9x Price-to-Sales versus peers at 2.1x12, AML3D carries a significant valuation premium that may be vulnerable to any execution disappointments. The metal 3D printing market is highly competitive with established players like EOS, GE Additive, and Velo3D23, and Chinese vendors are increasingly entering Western markets24.

3. Sector & Macro View

Sector Overview

The additive manufacturing sector is experiencing unprecedented growth, with the global market projected to reach USD 129.6 billion by 2032 at a 24.1% CAGR25. Metal 3D printing specifically is expected to grow from USD 1.19 billion in 2025 to USD 3.62 billion by 2030 at a 25.0% CAGR26.

Key growth drivers include increasing demand for lightweight components, complex geometries, and customized manufacturing across aerospace, defense, and industrial sectors26. The technology is transitioning from prototyping to full-scale production, with AI integration and automation driving efficiency gains25.

Macroeconomic Trends

Defense spending is experiencing a historic surge, with global military expenditure reaching USD 2.718 trillion in 2024, representing a 9.4% increase27. US defense spending alone reached USD 818.8 billion in 2023 and is projected to reach USD 931.6 billion by 202822.

The AUKUS alliance between Australia, UK, and US is driving significant investment in advanced manufacturing capabilities, with additive manufacturing identified as pivotal for defense industrial base capacity28 29. This creates a multi-billion dollar opportunity for qualified suppliers like AML3D.

Competitive Positioning

AML3D's WAAM technology offers competitive advantages including faster deposition rates, larger build volumes, and superior material properties compared to traditional powder-based systems18. The company's established relationships with US Navy and ITAR compliance provide defensive moats in the defense sector.

However, the company faces intense competition from established players with larger resources and broader technology portfolios. AML3D's focus on large-scale industrial applications and defense specialization helps differentiate from broader market competitors.

4. Catalyst Watch

Short-term Catalysts (Next 6-12 months)

US Navy Letter of Intent execution with potential for 400+ parts annually by 202630
European facility establishment with AUD 5 million investment planned5
Additional ARCEMY system sales with AUD 1-3 million per unit pricing5
Quarterly earnings releases demonstrating continued revenue growth
US manufacturing capacity doubling with AUD 12 million investment5

Long-term Catalysts (12+ months)

Path to profitability expected by FY2027 based on analyst forecasts5
AUKUS program expansion with potential for 100+ additive manufacturing systems30
European market penetration leveraging Boeing and Philips validation31
Technology leadership through increased deposition rates and prototype systems32
Supply chain integration with US Navy submarine program expansion21

5. Investment Summary

Five-Point Investment Thesis

Exceptional Growth Trajectory: 1,055% revenue growth in FY2024 with 95% from US customers, demonstrating successful market penetration strategy
Strategic Defense Position: Established relationships with US Navy and BlueForge Alliance provide access to multi-billion dollar defense market with recurring revenue potential
Technology Leadership: Proprietary WAAM technology offers superior deposition rates and material savings, creating competitive advantages in large-scale manufacturing
Strong Balance Sheet: AUD 32.1 million cash position with minimal debt provides financial flexibility for aggressive growth investments
Sector Tailwinds: Operating in high-growth metal 3D printing market (24.6% CAGR) with increasing defense spending globally (9.4% increase in 2024)

Final Recommendation: BUY

Confidence Level: Medium

Expected Timeframe: 12-18 months

Verdict: Bullish

AML3D represents a compelling growth opportunity in the rapidly expanding metal 3D printing market. The company's strategic positioning in US defense markets, proprietary technology advantages, and strong balance sheet provide a solid foundation for continued growth. While the premium valuation and extended path to profitability present risks, the significant market opportunity and established customer relationships support a positive investment thesis.

The 206% revenue growth in H1 FY2025 and strong cash position provide confidence in the company's ability to execute its growth strategy. With defense spending accelerating and AUKUS alliance driving industrial investment, AML3D is well-positioned to capitalize on macro trends while building a sustainable competitive advantage in specialized manufacturing applications.