Key Highlights:

  • S&P Dow Jones Indices confirmed on 4 September that Elsight and Smartgroup would join the ASX 200, effective before the open on 21 September.
  • Elsight's first half of 2026 brought record Revenue of US$23.4 million, but the shares remain well below their 52-week high.
  • Smartgroup reported a record first half and a higher dividend, although its shares have eased about 8% over the past month.
  • Upcoming company updates and execution against stated plans remain central to the next phase for both stocks.

Elsight and Smartgroup joined the S&P/ASX 200 on 21 September, and what happens next will depend more on Earnings than on index membership. Drone connectivity specialist Elsight needs to keep converting defence Demand into orders and revenue. Salary packaging and novated leasing provider Smartgroup needs to keep growing while the full electric-vehicle tax break is wound back and interest rates rise.

Why index inclusion is not what it used to be

The September 2026 rebalance added five companies to the ASX 200: Elsight, Smartgroup, Sunrise Energy Metals, Service Stream and Weebit Nano. EVT, GrainCorp, GQG Partners, Pantoro Gold and Tuas were removed. Inclusion usually brings buying from Index Funds and a larger pool of potential institutional shareholders.

History shows that support can be short-lived. ASX 200 additions between 2007 and 2026 rose an average of 4.5% from announcement to implementation. The pattern has weakened since 2022, however, and the June 2026 additions fell an average of 28.8% after implementation. Much of the index-buying effect is now priced in before the effective date.

The macro backdrop is also difficult. The Reserve Bank meets on 28–29 September with a hike to 4.60% widely expected, and Australia's Unemployment rate rose to 4.6% in August, 702.

Elsight (ASX:ELS): defence demand and a volatile share price

Elsight makes the Halo platform, which combines multiple cellular, satellite and radio links to keep drones and other uncrewed systems connected, including beyond visual line of sight. Demand has risen sharply with defence spending. The company reported record unaudited first-half 2026 revenue of US$23.4 million, including a sixth consecutive quarterly record of US$11.8 million in the June quarter. It expected non-GAAP net profit above US$10 million. Recurring Revenue for the half was US$2.9 million, already more than the whole of calendar 2025.

The company also noted that Halo is on the US Defense Contract Management Agency's Blue UAS Cleared List. It reported a US$2 million follow-on order from a US public safety customer and a first western government customer for its Stealth Initiative. cash of US$63.3 million and no Debt at 30 June. Operating Cash Flow was slightly negative for the quarter but positive at US$3.8 million for the half.

The share price has been volatile. Elsight was up about 46% for the year as of 16 September, data, and rose 5.7% to $5.16 on 24 September. That still leaves it well below its 52-week high of about $8.56, and the stock fell almost 10% on 31 August. In a December 2025 note, risks including sentiment around a possible Ukraine peace deal, customer concentration and delivery execution. With a Market Value of roughly $1 billion, Elsight is priced for continued fast growth.

Smartgroup (ASX:SIQ): record half, but policy and rates in focus

Smartgroup administers salary packaging and novated car leases, mainly for employees in health, education, government and not-for-profit organisations. Its first-half 2026 result showed revenue up 13% to $179.5 million, operating EBITDA up 16% to $73.8 million, and NPATA up 11% to $42.4 million. The fully franked interim Dividend rose 10% to 21.5 cents and was paid on 23 September.

Electric vehicles are driving most of the growth. battery electric vehicle orders jumped 162% and made up 68% of new vehicle orders, compared with 26% a year earlier. Management is targeting an EBITDA Margin in the mid-40s in 2027, up from 41% in the first half.

That dependence on EVs is also the main policy risk. The 2026–27 federal Budget proposed a phased wind-back of the full Fringe Benefits tax exemption for electric cars, according to tax adviser commentary. The details of the transition will affect how much of today's strong EV demand lasts. The shares traded around $11.60 on 24 September, . That is down about 8% over the month and below the 52-week high of about $13.65, but still up roughly 44% over the year.

Two very different newcomers

Apart from both joining the index in the same rebalance, the two companies have little in common. Elsight is a high-growth, globally focused defence technology company whose value depends on winning large, uneven contracts. Smartgroup is a mature, dividend-paying domestic Business whose earnings depend on employment, household budgets and tax policy.

Their risks differ too. Elsight's share price tends to move with defence news and wider enthusiasm for drone stocks. Smartgroup is more exposed to the RBA and to Canberra, because higher rates raise the cost of novated leases and changes to EV tax treatment affect the product's main selling point.

What investors could watch next

Elsight's September-quarter update: this is due around late October. Revenue, customer receipts and any progress with US defence programs will be the key measures after record first-half deliveries.

Contract flow: watch for new defence or public safety orders from Elsight, and for any shift in sentiment across drone stocks linked to Ukraine or Middle East developments.

The RBA decision on 29 September: a hike would add to the cost of leasing and to household budget pressure, which is relevant for Smartgroup.

EV tax legislation: watch for the final design and timing of the FBT changes, and for any sign of buyers bringing EV purchases forward or delaying them.

Smartgroup's full-year result: the company reports on a calendar-year basis, so its next major update is likely early in 2027.

The bottom line

ASX 200 entry has put Elsight and Smartgroup in front of more investors, but recent history suggests the index effect can fade quickly. Elsight now has to show that record defence-driven growth can last beyond a few large orders. Smartgroup has to show that it can keep growing as EV tax support is reduced and interest rates rise. How each company performs on those tests is likely to matter more than its new index membership.