Author: Atrium Research October 16, 2026
Nicholas Cortellucci, CFA | Equity Research Analyst | [email protected] | 647-391-3314
Luca Perna | Equity Research Associate | [email protected] | 647-969-1027
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What you need to know:
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ADF announced $82.0M in new contracts, led by a fast-track hydroelectric project in Western Canada, plus hydro work in Quebec, Ontario, and the Atlantic provinces and a recreational project on the U.S. West Coast.
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Fabrication on the Western Canada project begins in March 2027 and runs over nine months, while most of the other Canadian contracts begin in December 2026 and run over 18 months.
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On a pro forma basis, the awards lift ADF’s backlog to a record $775.7M, up from $693.7M at the end of Q2.
This morning, ADF Group (DRX:TSX) announced $82.0M in new contracts across Canada and the U.S. The largest is a fast-track hydroelectric project in Western Canada, alongside several hydro contracts in Quebec, Ontario, and the Atlantic provinces, and a recreational project on the U.S. West Coast. On a pro forma basis, these awards lift ADF’s backlog to a record $775.7M, up from $693.7M as of July 31ˢᵗ. We are maintaining our BUY rating and target price of $21.00/share on ADF Group.
The largest contract covers the fabrication of various steel structures for a hydroelectric project in Western Canada. Under a fast-track schedule, fabrication is set to begin in March 2027 and run over nine months. Fast-track work has historically been a margin driver for ADF, as clients pay a premium for speed and certainty of delivery. In FY25, fast-track orders from Eli Lilly helped drive ADF’s record year, with gross margin of 32% and adjusted EBITDA margin of 27%. The remaining Canadian contracts cover the fabrication and delivery of mechanically welded steel structures, LAR’s core product. Most of this work begins in December 2026 and extends over the following 18 months.
The U.S. contract is with a repeat client in the recreational sector, for whom ADF recently delivered a major contract in the western U.S. This work is set to begin in the coming months. All three plants (Terrebonne, Métabetchouan, and Great Falls) will be involved in executing today’s awards. Our estimates remain unchanged, as contracts like today’s are largely already baked into our FY28 forecast, which assumes strong backlog growth and conversion.
Q2 Recap DRX reported Q2 results last month, with revenue ahead of our expectations and profitability weighed down by non-recurring items (to read our full note, click here). Some key results that we would like to highlight:
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Revenue $95.0M, up 79% YoY and ahead of our $85.8M estimate, with LAR contributing $48.3M.
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Gross margin of 18.7% (vs. our 23.0% estimate), pressured by higher steel costs, customs duties, LAR’s legacy projects, and ~13,000 Terrebonne hours spent fabricating LAR’s new plant.
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Adjusted EBITDA of $8.4M (9% margin) vs. our $14.7M estimate, and EPS of $0.10 vs. our $0.32 forecast. Excluding $5.9M in DSU/PSU expense, EBITDA would have been $14.3M, in line with our estimate.
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Order backlog at the end of the quarter reached a record $693.7M (vs. $645.8M in Q1), with 64% being Canadian and including $243.3M from Groupe LAR.
Catalysts
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Quarterly Financial Results – Ongoing
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New Contract Announcements – Ongoing
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LAR Acquisition Integration & Capex Program – Ongoing
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