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1. Company Snapshot

1.a. Company Description

ADF Group Inc.engages in the design and engineering of connections in Canada and the United States.It also fabricates and installs complex steel structures and heavy steel built-ups, as well as miscellaneous and architectural metalwork services.


In addition, the company offers products and services for various segments of the non-residential construction market, including office towers and high-rises, commercial and recreational buildings, airport facilities, industrial complexes, and transport infrastructures.It serves general contractors, project owners, engineering firms and project architects, structural steel erectors, and other steel structure fabricators.The company was formerly known as Les Entreprises El Drago Ltée and changed its name to ADF Group Inc.


in August 1998.ADF Group Inc.was founded in 1956 and is headquartered in Terrebonne, Canada.

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1.b. Last Insights on DRX

ADF Group Inc.'s recent performance was negatively impacted by a slight dip in quarterly revenue, which fell to $80.0 million from $82.1 million in the same period last year. Despite this, the company reported significant improvements in gross margins and EBITDA. The decrease in revenue may be attributed to concerns over the company's backlog, which may have affected its ability to secure new projects. Additionally, the company's announcement of a normal course issuer bid (NCIB) may not have provided the expected boost to its stock price. The appointment of a new board member, Luc Reny, may also not have been a significant driver of the company's recent performance.

1.c. Company Highlights

2. ADF Group's Q2 Earnings: Navigating Tariff Uncertainties

ADF Group reported Q2 revenues of $53 million, down $21.9 million year-over-year, with YTD revenues at $108.5 million versus $182.3 million. The decline was driven by U.S. tariff uncertainty, disrupting production at the Terrebonne, Quebec plant. Gross margins fell to 20.7% for the quarter (from 36.9%) and 21.3% YTD (from 32.3%). Adjusted EBITDA dropped to $3.7 million and $14.1 million YTD, compared to $24.9 million and $48 million in prior periods. EPS was $0.03 for Q2, missing estimates of $0.21.

Publication Date: Sep -15

📋 Highlights
  • Revenue Decline: Q2 2026 revenue fell to $53M (-40% YoY), with YTD revenue at $108.5M (-40% YoY), driven by U.S. tariff disruptions and production delays in Terrebonne.
  • Margins Under Pressure: Gross margins dropped to 20.7% (Q2) and 21.3% (YTD), down from 36.9% and 32.3% respectively, due to steel price volatility and project delays.
  • Strategic Acquisition: ADF acquired Group LAR, adding $81M in annual revenue and $104.5M in backlog, to diversify into Canadian infrastructure and reduce U.S. exposure.
  • Backlog Growth: Total backlog reached $468M (Q2) with a $100M pending LAR acquisition, alongside a $40M Quebec energy contract, totaling $600M in backlog.
  • Capital Allocation: $3M in Q2 CapEx (ERP upgrades) and $11M full-year guidance, plus a $0.02/share dividend, reflect focus on operational efficiency and shareholder returns.

Financial Performance and Tariff Impact

The company's financial performance was significantly impacted by U.S. tariffs, leading to reduced fabrication hours and a work-sharing program at the Terrebonne plant. Cash balances totaled $50.9 million, with $7.4 million in operating cash flow YTD. Capital expenditures reached $3 million, including an ERP system upgrade, with full-year CapEx targeting $11 million for infrastructure projects.

Strategic Moves and Future Outlook

ADF secured a 5-year contract for a Quebec energy project and announced plans to acquire Group LAR, a Canadian steel structure manufacturer with $81 million in 2024 revenue and a $104.5 million backlog. The acquisition aims to diversify revenue toward Canadian markets, reduce U.S. exposure, and expand backlog. The company also received nuclear certification, opening opportunities in Ontario’s energy sector.

Valuation and Metrics

With a P/E Ratio of 6.71, P/B Ratio of 1.42, and EV/EBITDA of 4.05, the market appears to have priced in the challenges faced by ADF Group. The company's ROIC of 16.5% and ROE of 21.14% indicate a strong operational performance. The dividend yield stands at 0.48%, with a declared dividend of $0.02 per share.

3. NewsRoom

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ADF GROUP INC. Q3-2026 CONFERENCE CALL INVITATION

Dec -04

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ADF Group (TSE:DRX) shareholders have earned a 42% CAGR over the last five years

Nov -20

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ADF Group Aims to Double LAR's Order Backlog by End of 2027

Oct -29

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ADF GROUP INC. PROVIDES AN UPDATE FOLLOWING THE ACQUISITION OF LAR GROUP INC.

Oct -29

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ADF GROUP INC. CONFERENCE CALL INVITATION ACQUISITION OF GROUPE LAR INC.

Oct -23

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ADF GROUP INC.ANNOUNCES THE CLOSING OF THE ACQUISITION OF GROUPE LAR INC.

Sep -18

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ADF Group Second Quarter 2026 Earnings: Misses Expectations

Sep -13

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ADF GROUP INC. ANNOUNCES THE RESULTS OF THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JULY 31, 2025

Sep -11

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.80%)

6. Segments

Non-residential Construction

Expected Growth: 4.8%

The non-residential construction segment is expected to grow driven by increasing demand for commercial spaces, infrastructure development, and government initiatives. ADF Group Inc.'s expertise in steel construction and fabrication will cater to this growing demand, contributing to the segment's growth.

7. Detailed Products

Structural Steel Fabrication

ADF Group Inc. provides structural steel fabrication services for commercial, industrial, and institutional projects, including high-rise buildings, bridges, and stadiums.

Miscellaneous Steel Fabrication

ADF Group Inc. offers miscellaneous steel fabrication services for architectural features, such as stairs, railings, and canopies, as well as for industrial equipment and machinery.

Heavy Industrial Fabrication

ADF Group Inc. provides heavy industrial fabrication services for heavy machinery, equipment, and infrastructure projects, including mining, energy, and transportation industries.

Bridge Fabrication

ADF Group Inc. specializes in bridge fabrication services, including the design, fabrication, and installation of steel bridges for highway, railway, and pedestrian applications.

8. ADF Group Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for ADF Group Inc. is medium due to the presence of alternative materials and technologies that can replace traditional construction methods.

Bargaining Power Of Customers

The bargaining power of customers is low due to the specialized nature of ADF Group Inc.'s services, which limits the ability of customers to negotiate prices.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium due to the presence of multiple suppliers of raw materials and equipment, which gives ADF Group Inc. some negotiating power.

Threat Of New Entrants

The threat of new entrants is high due to the relatively low barriers to entry in the construction industry, which makes it easier for new companies to enter the market.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established players in the construction industry, which leads to intense competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 22.10%
Debt Cost 7.10%
Equity Weight 77.90%
Equity Cost 7.10%
WACC 7.10%
Leverage 28.38%

11. Quality Control: ADF Group Inc. passed 9 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

7.57$

Current Price

7.57$

Potential

-0.00%

Expected Cash-Flows