Aarit Industries Shares Plunge 60% as Defense Sector Cools and Backlog Shrinks
Israeli defense manufacturer Aarit Industries saw its stock plunge 60% from record highs, leaving institutional investors with heavy losses of around ₪250 million.
Aarit Industries, a prominent Israeli defense manufacturer specializing in fuzes for artillery and mortar shells, has experienced a dramatic market reversal. After soaring to unprecedented heights—delivering astronomical returns over recent years and reaching a peak market valuation exceeding ₪7 billion in January—the company's stock has plummeted by roughly 60%, sharply contrasting with the Tel Aviv 35 Index, which gained 16% over the same period.
The hardest hit by this steep decline are institutional investors who acquired a major block of shares from Aarit's controlling shareholder, Tzvi Levy, for approximately ₪400 million just as the stock was trading near its all-time highs. Due to a subsequent 73% drop in the share price, these institutional buyers—including foreign investors, Menora Mivtachim, Phoenix, and More Investment House—are now facing estimated losses of roughly a quarter of a billion shekels, even after accounting for substantial dividend payouts.
The Rise and Cashing Out of Tzvi Levy
For Levy, a reclusive ultra-Orthodox businessman from Tiberias, the collapse follows a staggering 6,630% surge in Aarit's value over a three-year period. Levy had acquired controlling stakes in the firm two decades ago for a mere few million shekels, steering the company through severe crises and near-bankruptcy alongside CEO Haim Shepfler. The company eventually hit a golden era driven by soaring global defense demand, sparked by the Russia-Ukraine war and subsequently Israel's ongoing Iron Swords war, which drastically increased the IDF's ammunition restocking needs.
Capitalizing on the peak in January, Levy sold a 7% stake in the company for about ₪395 million, following an earlier divestment last year worth ₪50 million. Following the stock correction, Aarit now trades at a valuation of around ₪1.5 billion. Levy retains a 39% stake valued at ₪615 million, while other major institutional holders include Phoenix (8.3%), Harel Insurance (5.7%), and IBI Investment House (5.1%).
Shrinking Order Backlog and Weakened Financials
The downturn reflects a broader cooling of investor enthusiasm for the defense sector amid easing geopolitical tensions in certain zones and concerns over inflated valuations. However, Aarit's specific struggles stem from deteriorating business performance. In the first half of the year, revenues dropped by 14% year-over-year to approximately ₪133 million, while net profit plunged 45% to ₪52.4 million. Looking ahead, the company projects full-year 2026 revenue of around ₪340 million—a 42% decline compared to the previous year—while its order backlog has shrunk to ₪672 million, down from ₪1.1 billion.
"Amid challenging market conditions, Aarit continues to expand its global footprint through strategic partnerships in India, Europe, and the United States, securing vital international defense contracts." - Market Analysts
Despite the negative market sentiment, Aarit recently announced an extraordinary dividend distribution of approximately ₪529 million, with ₪317.4 million already distributed. Furthermore, the company has sought to offset declining local momentum by securing a $16 million order from Indian defense giant BEL, winning a North American artillery fuze tender, entering NATO markets, and establishing a new manufacturing base in the United States.
