ADF Group: Buy, Sell or Hold?

Ventum Capital Markets analyst Daniel Lavoie reiterated his “Buy” rating and $20.50 target on ADF Group (ADF Group Stock Quote, Chart, News, Analysts, Financials TSX:DRX) after the company announced $82-million in new contracts, primarily tied to hydroelectric infrastructure projects.

In an Oct. 15 update, Lavoie said the awards strengthen his outlook for ADF’s growth and could push backlog above $700-million by the end of fiscal Q3 2027, surpassing the previous record of $693.7-million reported July 31.

The largest contract, awarded in Western Canada, is expected to begin fabrication in March 2027 and run for nine months.

Additional hydroelectric projects in Quebec, Ontario and Atlantic Canada are scheduled to begin as early as December 2026, with work extending over the following 18 months.

Lavoie said the new contracts reinforce his view that ADF’s acquisition of Groupe LAR provides a significant growth opportunity in the Canadian hydroelectric market.

The $82-million in new awards exceeds his fiscal Q3 booking estimate of $60-million.

The analyst expects fiscal 2028 revenue to increase by about $100-million, or 26.2%, to $460-million, supported by backlog conversion and growing contributions from hydroelectric projects.

Lavoie also highlighted a new contract in the U.S. West Coast recreational sector, awarded by an existing customer following the successful completion of another major project.

He argued that the repeat business demonstrates ADF’s ability to win additional work through its execution record and strengthens its position in complex structural steel fabrication.

Lavoie said the combination of growing hydroelectric demand and repeat U.S. business is creating a more diversified project pipeline that should support growth beyond fiscal 2027.

He believes ADF is approaching an inflection point in earnings and cash flow growth that is not reflected in its valuation.

The stock currently trades at less than four times Lavoie’s fiscal 2028 EV/EBITDA estimate.

Lavoie expects ADF to generate Adjusted EBITDA of $48-million on revenue of $365-million in fiscal 2027, improving to Adjusted EBITDA of $79-million on revenue of $460-million in fiscal 2028.

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