When It Grains, It Pours: Excellent Conditions for GrainCorp Just Keep Getting Better

The stars have aligned for GrainCorp. Back-to-back bumper crops in Australia allow GrainCorp to maximise capacity in its processing infrastructure, and supply shortages in the Northern Hemisphere are leading to high grain prices, allowing GrainCorp to command historically high supply chain margins. We raise our fair value estimate for shares in GrainCorp to AUD 6.50, from AUD 6.00 previously. We increase our fiscal 2022 EBITDA forecast by 30% to AUD 659 million on the back of higher grain volumes and strong export demand. We also expect elevated production levels to benefit fiscal 2023 carry-in volume, and we raise our fiscal 2023 EBITDA forecast by 7% to AUD 291 million. But we do not expect such favourable conditions to persist and our longer-term forecasts remain intact. Shares in no-moat GrainCorp screen as expensive.