Shares in GrainCorp Ltd (ASX: GNC) were sold down sharply this week after the company said that its winter crop receivals would be down for the year and that it would incur a loss on an asset sale.
But according to the team at Macquarie, the stock still remains undervalued, with its strong balance sheet a positive, with net cash of $321 million, and the potential for share price upside from here, along with a healthy dividend yield.
Challenging harvest
The grain handler said in a statement to the ASX on Wednesday that both harvest volumes and grain prices were under pressure.
As the company said:
GrainCorp's FY26 receival volumes are being impacted by an expected lower year-on-year ECA crop. Prevailing commodity prices are resulting in less grain being brought to market and, together with near-record international grain and oilseed production, are continuing to place pressure on margins for grain handlers. GrainCorp's preliminary estimate of total receival volumes for FY26 is 11.0 – 12.0 million tonnes, compared to 13.3 million tonnes received in FY25.
GrainCorp said the winter crop harvest activity was largely complete in Queensland and northern New South Wales, while further south weather interruptions continued to affect the harvest.
In response to the challenging conditions, GrainCorp said it was "maintaining a strong focus on cost management while continuing to deliver industry-leading customer service and reliability''.
The company said it would provide earnings guidance at its annual general meeting on February 18.
Asset sale to notch up a loss
GrainCorp also said it had entered into an agreement to sell GrainsConnect Canada, which it would recognise a loss of $5-$10 million on.
GrainCorp Managing Director Robert Spurway said the divestment followed a strategic review of the company's assets.
He went on to say:
This transaction reflects GrainCorp's ongoing commitment to portfolio optimisation and our readiness to rationalise assets where necessary to improve returns. Divestment of GrainsConnect allows GrainCorp to focus on alternative value-creating opportunities that are in the best interests of our shareholders.
That transaction is expected to be finalised in the first half of 2026.
GrainCorp shares plummeted following the company's market updates, falling as much as 25.1% at one point to $6.70 before recovering to close at $7.09 on Wednesday.
Shares looking cheap
The team at Macquarie lowered their price target on the shares from $8.80 to $8.30 on this week's news; however, they said the company's strong balance sheet was a positive, supporting its investment needs, "healthy dividends", and the $75 million share buyback announced last financial year.
Once dividends are factored in, Macquarie is predicting a total shareholder return from GrainCorp shares of 21.2%.
They are also forecasting the dividend yield to stay healthy, predicting a 4.9% yield this financial year.
