The Graincorp Ltd (ASX: GNC) share price is having a solid week.
In morning trade, the grain exporter's shares are up 1% to $7.83.
This means that its shares are now up 4% over the last two sessions.
What's going on with the Graincorp share price?
Investors have been buying the company's shares this week following the release of the March ABARES crop report.
That report revealed that conditions have been favourable and has seen the 2023-24 east coast winter crop forecast increase from 21.7mt to 23.2mt.
Bell Potter has been running the rule over the report and believes it could have positive implications for the grain exporter. It commented:
The March ABARE crop report highlighted an uplift in the 2023-24 winter and summer crop forecast, having implications for both CPC (crop protection contract) payments and likely receival outcomes.
We have raised our FY24e crop receipt and export assumptions towards the upper end of GNC's guidance range (10.0-11.0mt and 4.5-5.5mt, respectively), while also lifting CPC payments. EBITDA changes are -3% in FY24e and +1% in FY25e, resulting in NPAT changes of -7% in FY24e and +1% in FY25e.
Should you invest?
Bell Potter has responded to the report by retaining its buy rating and $9.30 on the company's shares.
Based on the current Graincorp share price, this implies potential upside of 19% for investors.
In addition, the broker is forecasting a 22 cents per share dividend in FY 2024. This equates to a 2.8% dividend yield, boosting the potential return beyond 20%.
The broker concludes:
Valuation remains undemanding, with GNC trading at 5.6-6.3x through the cycle PBTDA. We continue to view the GNC share price as not reflecting the underlying improvement in through the cycle earnings (FY24e opening EBITDA guidance is 15% higher than opening FY21 EBITDA guidance, despite a forecast ~30% lower throughput level) and stronger balance sheet position.
