This report is an updated version of the report published on 16 May 2025 at 3:19 PM AEST.

Graincorp Ltd (ASX: GNC)

Graincorp Ltd is an ASX listed entity, which operates through two segments, Agribusiness and Processing.

Recommendation Rationale – SELL at AUD 7.87

• Trading Around Resistance: The stock has crossed its first resistance (R1) of AUD 7.458 and is approaching its R2. However, the stock has entered the overbought zone as represented by 14-day RSI reading of ~81.13. Hence, the stock may face some consolidation before scaling further upside.
• Jump in Employee Cost and Finance Cost: In H1FY25, GNC’s employee costs increased by 17.59% year-over-year to AUD 230.8mn and its finance costs increased by 17.70% to AUD 48.1mn.
• Overvalued Multiples: On a forward 12-month basis - key valuation multiples (EV/EBITDA, P/E and Price/Cash Flow) are higher than median of the Food & Tobacco sector.
• Climate and Weather-Related Risks: GNC's operations are heavily influenced by weather conditions. Adverse weather events, such as prolonged droughts or floods, can significantly reduce grain production, affecting the company's intake volumes and storage utilization. For instance, a protracted drought in eastern Australia could disrupt grain intake and reduce storage volumes, impacting revenue streams.

GNC Daily Chart

Valuation Methodology: Price/Earnings Multiple Approach (FY September'25E) (Illustrative)

Given the H1F25 revenue and NPAT growth, increase in FY25 EBITDA and NPAT guidance, higher production in East Coast Australia (ECA), early start of winter crop harvest in Queensland and Northern NSW, the stock might trade at a slight premium to its peers. For valuation, a few peers like, A2 Milk Company Ltd (ASX: A2M), Bega Cheese Ltd (ASX: BGA), Select Harvests Ltd (ASX: SHV), and others have been considered.

Given its current trading levels, recent rally in the share price, and risks associated, it is prudent to sell the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 7.87, as of 16 May 2025 at 2:33 PM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 16 May 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.    

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.