GrainCorp: Profitability Should Snap Back to Reality as Harvests Normalize

Three consecutive bumper crops and strong demand for Australian grain have allowed no-moat GrainCorp to command historically high supply chain margins in recent years. Global supply shortages amid a poor Northern Hemisphere harvest and disruption to production and trade from the Ukraine/Russia conflict have lifted global pricing, encouraging exports and allowing GrainCorp to maximize capacity in its processing infrastructure. We forecast fiscal 2023 EBITDA of AUD 525 million, based on an above-average east coast winter crop of about 31 million metric tons. But back-to-back-to-back bumper harvests aren't typical, particularly in combination with globally high grain prices. We expect GrainCorp's profitability to normalize over the coming years as cropping normalizes and we maintain our AUD 7.20 per share fair value estimate.