Macquarie tips 20%+ return for this ASX 200 stock

The broker has good things to say about this stock.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you are looking for some big returns, then it could be worth checking out the ASX 200 stock in this article.

That's because the team at Macquarie Group Ltd (ASX: MQG) believes it could generate mouth-watering returns over the next 12 months.

A man holding a cup of coffee puts his thumb up and smiles with a laptop open.

Image source: Getty Images

Which ASX 200 stock?

The stock that Macquarie has given the thumbs up to is Graincorp Ltd (ASX: GNC).

It is a diversified and integrated Australian agribusiness that connects growers to domestic and international consumers in over 50 countries.

According to the note, the broker believes this ASX 200 stock is well-positioned to benefit from improving weather conditions. It said:

Winter rainfall in July & early Aug brought welcome relief to VIC, improving prospects for average yields; soil moisture profile now about avge. NSW & QLD conditions remain optimal with full winter plant programme and good soil moisture conditions. We U/G our expectations for 2025/26 winter crop to 28mt (prior 26mt, ABARES 27.2mt) driven by improvement in seasonal conditions. This underpins our FY26e EBITDA +5% vs prior est to $342m, 7% above $320m GNC TTC earnings est.

Though, it does acknowledge that its grain export business is battling depressed margins. The broker adds:

Margins remain depressed across GNC's grains export biz as wheat markets continue to face elevated global supplies; Nth hemisphere harvest up vs prior year. US peer 2Q results corroborate this noting depressed supply chain margins & "oversupplied" grain markets. Export vols tracking to upper end of GNC guidance range (6.5-7.5mt). We lower our fct by 0.3mt to 7.7mt on bookings slowdown in 4Q. [..] Some recent bullishness in Black Sea region with wheat prices lifting from lows on delays to Russian harvest. However, appears largely timing related and rally has not been sustained.

Big returns

According to the note, the broker has retained its outperform rating on this ASX 200 stock with an improved price target of $9.10.

Based on its current share price of $7.93, this implies potential upside of 15% for investors over the next 12 months.

In addition, the broker is expecting a 6% dividend yield in FY 2025 and FY 2026, which boosts the total potential return beyond 20%.

Commenting on its buy recommendation, Macquarie said:

OP. Improvement in southern Aust seasonal conditions + optimal north increases likelihood of upgrades to ABARES ECA winter crop est and GNC FY26 earnings. Bal sheet rock solid with core net cash position underpinning GNC investment needs, ongoing divs and $75m on-foot buyback (~$36m complete).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

A man in his office leans back in his chair with his hands behind his head looking out his window at the city, sitting back and relaxed, confident in his ASX share investments for the long term.
Broker Notes

Buy, hold, sell: Netwealth, PLS, and Reliance shares

Morgans has given its verdict on these shares. Let's see what the broker is saying.

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Brokers name 3 ASX shares to buy right now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A panel of formidable business people stand in a group with serious looks on their faces as if in judgement of what's before them.
Broker Notes

3 ASX shares to buy: experts

In new notes, brokers say these ASX stocks are good buys today.

Read more »

A man holding a cup of coffee puts his thumb up and smiles with a laptop open.
Broker Notes

Bell Potter is tipping a 40% return from this ASX 200 share

A 40% return could be on the cards for buyers of this share.

Read more »

Woman checking bottle expiry dates.
Broker Notes

Here's why Morgans just upgraded Woolworths shares

The supermarket giant just received a boost from Morgans.

Read more »

A frustrated young woman shopper holds her hands up with a pained, annoyed expression on her face as she stands next to her trolley in a grocery store and examines the stock offerings on the shelf in front of her.
Broker Notes

Why this leading broker just downgraded Woolworths shares

Let's see why this supermarket giant's shares have just been hit with a downgrade.

Read more »

A young man goes over his finances and investment portfolio at home.
Broker Notes

Are Mineral Resources shares a buy in May?

Let's see what one leading broker is saying about this mining share.

Read more »

A smiling woman holds a Facebook like sign above her head.
Broker Notes

5 ASX shares scoring upgraded ratings this week

Experts have raised their ratings on JB Hi-Fi, Beach Energy, Amcor, and others this week.

Read more »