Morgans assesses GrainCorp’s first half result was strong. FY21 guidance was also materially upgraded. The initial outlook for the 2021/22 east coast winter crop is considered encouraging. Add rating and target increases to $6.28 from $6.17.
The broker highlights strong first half demand for Australian grain and oilseed (boosting margins), contribution from operational initiatives and favourable crush margins in the Processing business.
The broker makes large upgrades to FY21 forecasts, and FY22-23 will benefit from higher carry-over grain. The ABARES initial forecast for the upcoming winter crop is awaited before further adjusting forecasts.
Sector: Food, Beverage & Tobacco.
Target price is $6.28.Current Price is $5.43. Difference: $0.85 – (brackets indicate current price is over target). If GNC meets the Morgans target it will return approximately 14% (excluding dividends, fees and charges – negative figures indicate an expected loss).