Graincorp Ltd (ASX: GNC) shares could be undervalued right now.
That's the view of analysts at Macquarie Group Ltd (ASX: MQG), which are tipping the ASX 200 stock to deliver market-beating returns over the next 12 months.
What is the broker saying?
Macquarie notes that the grain exporter released its FY 2025 results this week. It notes that Graincorp's performance was a touch softer than expected due to weakness in crush margins. It said:
Result impacted by ongoing weakness in crush margins (higher local sourcing costs & elevated global crush) which weighed on earnings. More broadly, supply chain margins at cyclical lows on ample global grain prod'n; this is likely to persist into FY26 absent significant supply shocks (Nth Hemisphere harvest from May CY26 important in this regard). Notwithstanding margin pressure, GNC delivered solid AgBiz result with EBITDA +33% vs pcp and +3% vs the street; cost control & ex-wheat opportunities key features.
The broker was full of praise for the way management has been able to navigate the lower margin environment. It expects the company's good cost control to be supportive of earnings growth in the coming years. Macquarie adds:
GNC has shown good ability to manage lower margin environment over last 12 months, eg, chickpea & canola seed exports in 1H. In our view another year of above avg ECA cropping should present export and earning opportunities, partly offsetting headwinds from lower crop prod'n & compressed margins. Further, cost control and build of benefits from transformation programme additive to earnings over FY26-28.
Time to buy
According to the note, Macquarie has retained its outperform rating on the ASX 200 stock with a trimmed price target of $8.84 (from $9.20).
Based on its current share price of $7.98, this implies potential upside of almost 11% for investors over the next 12 months.
In addition, the broker is forecasting a fully franked 5.3% dividend yield in FY 2026, which boosts the total potential return beyond 16%.
Overall, Macquarie thinks that its shares are undervalued and that investors should be buying the dip. It concludes:
Retain OP. Sharp share price reaction on fairly modest earnings miss. We think stock offers value considering robust dividend yield, cash generation & exposure to east coast grains production through its privileged asset base which has latent value & infrastructure qualities in our view.
Valuation: SoTP-based TP -4% to $8.84 ($9.20 prior) on change to earnings and reduced multiple in N&E biz to reflect pressure in crush margins. Ballast to TP is provided with thru-cycle earnings & asset replacement valuations. Catalysts: FY26 guidance at Feb AGM, progress of 2025/26 winter harvest currently underway, evolution of offshore grain prices.
