Are Austal shares a buy, hold or sell after soaring 17% yesterday?

Austal Ltd (ASX: ASB) shares were making headlines yesterday, after the ASX defence stock rocketed an astonishing 17% in a single session. 

Investors were gaining positions in the company following the release of an important ASX announcement.

Austal is an Australian shipbuilder and defence contractor providing design, manufacturing and support capabilities for defence and commercial customers.

Its share price remains down 33% year to date despite yesterday's sharp rise.

What did Austal announce?

Yesterday, Austal released a report saying it received a non-binding, conditional offer from Hanwha Defence USA to acquire Austal USA for US$1.05–1.2 billion.

As reported by James Mickleboro, the non-binding proposal from Hanwha Defence USA to acquire Austal USA excludes the company's Australasian core operations. The strategic shipbuilding agreement with the Commonwealth of Australia remains intact, providing continuity and supporting value for shareholders.

The company also reported:

• An expected FY26 group EBIT loss of around $113 million, driven by non-cash provisions at Austal USA
• Austal USA forecast EBIT loss of approximately $175 million, following revised contract recoverability
• Austal Australasia business remains strong, with expected EBIT of about $62 million
• Cash at bank of $312 million as at 30 June 2026; $366 million as at 31 July 2026. 

With the Hanwha offer now under consideration, Austal's board will assess any further firm proposal that emerges, with the aim of acting in the best interests of all shareholders.

What did Bell Potter have to say?

Following this news, and the subsequent 17% stock price rise, the team at Bell Potter issued a new report on Austal shares. 

The broker said with Austal currently trading at an EV of $1.8b, the bid implies Austal Australasia trades at ~6.1-11.8x FY26 EBIT of $62m depending on tax leakage. 

We do not see issues with this bid from a government approval standpoint but do see risks stemming from the DD process. Given the bid was made prior to today's negative trading update, it is feasible that the bid could be reduced. As noted in our July 2026 note, operational risks are rising, potentially resulting in further reductions to Hanwha's bid following DD. Nevertheless, we believe Hanwha's rationale for the bid is strategic given ASB's presence in the US Naval Industrial Base and workforce.

Hold rating retained

In yesterday's report, Bell Potter retained its hold recommendation on Austal shares. 

However the broker did increase its price target to $5.00 (previously $4.10). 

From current levels, this indicates roughly 11% upside potential. 

The post Are Austal shares a buy, hold or sell after soaring 17% yesterday? appeared first on The Motley Fool Australia.

Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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