GrainCorp: Building up the cash

About the author:

Author name:

By Belinda Moore

Job title:

Senior Analyst

Date posted:

12 May 2023, 8:00 AM

Sectors Covered:

Agriculture, Food & Beverage, Travel and Chemicals

• GrainCorp's (ASX:GNC) 1H23 result was down on the record pcp but slightly ahead of expectations.
• Over half of the A$30m upgrade to GNC’s FY23 guidance was due to a positive UMG revaluation with the remainder likely from Processing. GNC also materially upgraded its ‘through-the-cycle’ EBITDA guidance from A$240m to A$310m largely reflecting structural margin improvements in its Processing and FFO businesses.
• The outlook for the 2023/24 (FY24 earnings) east coast winter crop is uncertain with good subsoil moisture levels for planting but a concerning rainfall outlook from the BOM. Therefore, FY24 earnings remain uncertain.
• While GNC is worth materially more than the current share price, with earnings now set to decline over FY23/24/25, we maintain a Hold rating.

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