Firming indications of a big east coast winter crop in Australia bode well for Graincorp Ltd (ASX: GNC), with another broker tipping it will deliver double-digit shareholder returns over the next year.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Australian Crop Report, released in September, says that above average rainfall in July in South Australia and Victoria, plus follow up rainfall in August, balanced out an unfavourable start to the winter cropping season.
Wilsons Advisory and RBC Capital Markets both say this is good news for Graincorp, with Wilsons having an overweight recommendation on the stock.
Wilsons has a $9.05 12-month price target on Graincorp shares, up from $8.71, and combined with expected dividend payments, says shareholders can expect a 12-month return of 10.9%.
We take the opportunity to increase our FY26 crop and grain receival assumptions, which drives significant earnings per share upgrades. While the deep discount in GrainCorp's valuation has narrowed in recent months, the strengthened earnings momentum and ongoing capital management opportunities support our expectation of further share price performance in the near-term. We retain an overweight rating.
Wilsons said that the ABARES report forecasts an east coast winter crop of 30Mt, which is up 11% from the previous forecast.
While this forecast was still about 6% below the previous season's crop yield, it remained about 56% greater than the 25-year historical average.
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Upgrades to flow into next year also
Wilsons has upgraded its earnings expectation for Graincorp by 22% for FY26, and 10% for FY27, "as some of the additional volume carries into FY27, supporting higher export activity''.
RBC Capital Markets is even more bullish on Graincorp shares, recently putting a $10.50 price target on the stock. RBC also said logistics firms Qube Holdings Ltd (ASX: QUB) and Aurizon Holdings Ltd (ASX: AZJ) stood to benefit from the strong winter crop.
