Beacon raises price target on Firan to $30.00

Beacon Securities analyst Russell Stanley says Firan Technology Group’s (Firan Technology Group Stock Quote, Chart, News, Analysts, Financials TSX:FTG) Q2 beat showed stronger bookings, better margins and early traction from its Calgary operation.

In a July 10 update, Stanley maintained his “Buy” rating on Firan and raised his target to $30.00 from $26.00, citing equal parts estimate revisions and multiple expansion.

Firan reported Q2 revenue of $52.7-million, Adjusted EBITDA of $10.5-million and diluted EPS of 20 cents, ahead of Stanley’s estimates of $50.9-million, $8.0-million and 12 cents, respectively. Consensus was $52.4-million, $9.1-million and 16 cents.

Revenue rose 8% year-over-year, while Adjusted EBITDA increased 20% and diluted EPS rose 45%.

Stanley said gross margins were the main story, beating his forecast by 692 basis points. Management attributed the strength to operational improvements and scale economies across multiple facilities, which more than offset foreign exchange, inflation and tariff-related cost pressure.

Gross margin improved to 36%, while Adjusted EBITDA margin reached 20%, both the highest levels since Q1 2023.

Bookings rose 89% year-over-year to $87-million, driving a book-to-bill ratio above 1.6 times. Backlog increased 45% to more than $193-million, with 66% expected to convert to revenue over the next four quarters.

The analyst noted that purchase orders from two new classified defence programs accounted for about half of the backlog increase, while the rest of the business also showed solid order activity.

“Classified defence programs still early in ramp up phase, but should be gigantic,” Stanley said.

He said annual spending on the circuit board products tied to those programs could reach $50-million to $100-million once fully ramped, with Firan likely one of multiple suppliers.

Firan ended the quarter with almost $11-million in cash, long-term debt of $13.7-million and more than $23-million of unused credit.

Stanley said the stock trades at just over 14 times his fiscal 2027 Adjusted EBITDA forecast. Potential catalysts include M&A, contract wins and Q3 results in October.

The analyst expects Firan to generate Adjusted EBITDA of $37-million on revenue of $210-million in fiscal 2026, improving to Adjusted EBITDA of $49-million on revenue of $241-million in fiscal 2027.

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