Top broker tips ‘scope for significant capital return’ on GrainCorp shares

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Graincorp Ltd (ASX: GNC) shares are bouncing more than 9% today after the ASX 200 agribusiness released its 1H FY23 results and upgraded its full-year earnings guidance.

The GrainCorp share price is currently $7.75, up 9.15%.

GrainCorp has delivered a “significant beat” on consensus estimates, according to UBS analyst Apoorv Sehgal, and ASX investors are pretty impressed too, given the big price boost for the shares today.

Let’s compare GrainCorp’s numbers to analysts’ expectations.

GrainCorp shares soar on EBITDA and NPAT upgrades

As reported in The Australian, Sehgal noted revenue has increased by 18% to $4.5 billion. This is well above the $3.8 billion that analysts expected.

In terms of FY23 full-year guidance, GrainCorp now expects earnings before interest, tax, depreciation, and amortisation (EBITDA) of between $500 million and $560 million.

That’s up from previous EBITDA guidance of $470 million to $530 million. The consensus expectation has been $507 million.

GrainCorp also forecasts a net profit after tax (NPAT) of $220 million to $260 million.

The company was previously guiding $180 million to $220 million. The consensus has been $214 million.

Are GrainCorp shares a buy?

Sehgal says he sees “scope for significant capital return” on GrainCorp shares.

UBS has a buy rating on the ASX agriculture stock.

Its 12-month price target is $8.65, implying a potential upside of 11.6% for investors who buy today.

What is the Graincorp dividend?

GrainCorp shares will pay an interim dividend of 24 cents with 100% franking on top.

This is the same amount that GrainCorp paid for 1H FY22.

Even after today’s bounce, GrainCorp shares are still offering healthy returns for income investors.

The stock is trading on a trailing dividend yield of 7% based on the current share price.

Why is the stock down 27% over the past 12 months?

Here’s the short answer.

GrainCorp shares had a ripper run over 2021 and into the second half of 2022.

What’s a ripper run? That would be a 154% spike in the share price in 14 months. Yeah, pretty major!

This culminated in the ASX agriculture share reaching an all-time high of $10.86 on 4 May last year.

It’s not uncommon for ASX shares to experience a pullback after such meteoric growth.

GrainCorp has gradually fallen since May 2022 until an apparent stabilisation in March.

The post Top broker tips ‘scope for significant capital return’ on GrainCorp shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia

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