Why Bell Potter forecasts a 16% upside for this surging ASX All Ords defence stock

The All Ordinaries Index (ASX: XAO) is down 5.5% in 2025, but that hasn't held back this surging ASX All Ords defence stock.

The outperforming company in question is Aussie shipbuilder Austal Ltd (ASX: ASB).

Up 3.8% in early afternoon trade at $3.84 a share, the Austal share price is up 23.8% year to date.

The ASX All Ords defence stock has also raced ahead of the benchmark over the full year, gaining 80% in 12 months compared to the tepid 0.4% growth posted by the All Ordinaries.

And with the Austral share price having tumbled more than 15% since 10 March, Bell Potter believes there are more outsized gains to be had.

Positive outlook for ASX All Ords defence stock

As The Australian Financial Review reported, Bell Potter has a buy rating on Austal, with a price target of $4.45 a share.

That represents a potential upside of 15.9% for the ASX All Ords defence stock from current levels.

The broker is bullish on Austal's record contract book and positive outlook.

"Austal has solidified its position as a key contributor in both the Australian and US naval industrial bases," analyst Daniel Laing said.

Among the reasons supporting its buy recommendation, Bell Potter pointed to record levels of global defence spending and the increasing focus on naval power in the tumultuous Pacific.

Austal shares could also garner tailwinds from the AUKUS agreement along with a shipbuilding agreement with the Aussie government.

What's been happening with Austal shares?

Austal shares grabbed investor attention in February on the heels of its strong half-year earnings results. Highlights included a 108.9% year-on-year increase in net profit after tax to $25.1 million and revenue of $825.7 million, up 15.1%.

The balance sheet was also strong, with the ASX All Ords defence stock reporting a big lift in its net cash position to $212.6 million as at 31 December.

As for this week's 15% retrace, that followed on Austal's announcement on Tuesday that it had successfully raised $200 million in capital via an institutional share placement. The shipbuilder aims to raise another $20 million from an ordinary share purchase plan.

While that leaves the company well-capitalised, investors sold off the stock as the placement was at a price of $3.80 a share. That's a 15.6% discount to the $4.50 share price Austal closed at prior to entering a trading halt ahead of the capital raise announcement.

But if Bell Potter has it right, the ASX All Ords defence stock could recoup most of those losses in the months ahead, handing investors who buy shares today a potential 16% gain.

The post Why Bell Potter forecasts a 16% upside for this surging ASX All Ords defence stock appeared first on The Motley Fool Australia.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Austal. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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