There could be some big returns ahead for owners of Graincorp Ltd (ASX: GNC) shares.
That's the view of analysts at Bell Potter, which are feeling bullish on this ASX 200 stock.
What is the broker saying about this ASX 200 stock?
According to the note, the broker has reiterated its buy rating on the grain exporter's shares with a slightly trimmed price target of $9.50.
Based on where this ASX 200 stock is currently trading, this implies potential upside of 29.5% for investors over the next 12 months.
In addition, the broker is forecasting an attractive fully franked 3% dividend yield in FY 2024. If we add this into the equation, it boosts the total potential return from Graincorp's shares to approximately 32.5%.
Why is it bullish?
Bell Potter believes that operating conditions are relatively favourable for Graincorp. It highlights "improved soil moisture, a broadly normal near-term outlook and tighter domestic wheat premiums."
And while it has lowered its earnings estimates in FY 2024 a touch to reflect weaker crush margins, its medium term earnings remain largely unchanged.
In light of this, the broker believes that the ASX 200 stock's valuation is undemanding at current levels and recommends it as a buy. Its analysts explain:
Our Buy rating is unchanged. Valuation remains undemanding, with GNC trading at 5.2-5.9x through the cycle PBTDA and FY24e conditions appearing consistent with through the cycle assumptions (winter crop + sorghum of 22-23mt). While early, improved east coast root zone soil moisture, a broadly average rainfall outlook to April and early readings favouring an ENSO-neutral April-June (NOAA at 73%) are in general stronger than expectations a month ago for FY25e (i.e. 2024 winter crop).
