Macquarie Group Ltd (ASX: MQG) has highlighted GrainCorp Ltd (ASX: GNC) as its favourite S&P/ASX All Ordinaries Index (ASX: XAO) stock right now.
The agribusiness and processing company's shares are trading in the green on Friday afternoon. At the time of writing, they're up 0.74% to $8.845 a piece. Over the past 6 months, the shares have soared 33.08% higher, despite mixed weather conditions around the country.
For context, the ASX All Ords Index is trading in the green on Friday afternoon. At the time of writing, the index is 0.49% higher at 9,224.30 points.
The broker is optimistic about the ASX All Ords stock and has an outperform rating on its shares. It has also set a $9.20 12-month target price on the shares, which represents a potential 4% upside for investors.
"FY25E EPS +0.4% reflecting buyback progress. FY26E EPS +1.4% as we reflect harvest updates, expectation for slight fall in supply chain margins offset by higher exportable surplus. Minor change to outer years (+0.4-0.5%)," it said in a note to investors.
"TP of $9.20 +1% on slightly lower FY25E net debt (higher op cash fct) & lower share count reflecting buyback progress."
It's the broker's preferred pick over Nufarm Ltd (ASX: NUF) and Elders Ltd (ASX: ELD). Macquarie has a neutral rating on Nufarm shares, and Elders shares are restricted.
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So why is GrainCorp the standout?
In a note to investors, Macquarie said the ASX All Ords share has an FY25 guide for underlying earnings before interest, tax, depreciation and amortization (EBITDA) of $285 million to $325 million. It also expects underlying net profit after tax (NPAT) of $65 million to $95 million.
Macquarie estimates that the company's EBITDA and underlying NPAT will be $316 million and $91 million, respectively. It adds that market expectations are similar with a predicted EBITDA and underlying NPAT of $314 million and $89 million, respectively.
"2025 saw above avg grain vols across ECA and this underpinned 1H's EBITDA +39% vs pcp. 2026 looks set to deliver another year of ECA grain vols >30mt (5th time in 6 yrs)," the broker said in its note.
"Offsetting + vols, supply chain margins near cyclical lows on well-supplied global grain environment. This looks set to continue into at least 1H26. Main portion of our +60bp lift in AgriBiz EBITDA margin driven by end of crop insurance contract payments i.e. limited improvement in underlying supply-chain margins."
Macquarie also added that GrainCorp's balance sheet continues to be a key strength for the business. With core net cash of $296 million in H1, Macquarie forecasts $400 million for the second half of the year.
"This underpins cap mgnt optionality incl $75m buyback on-foot and ongoing special dividends," Macquarie said.
GrainCorp is scheduled to post its full-year FY25 results on 13 November.
