If you are looking for some big returns, then it could be worth checking out the ASX 200 stock in this article.
That's because the team at Macquarie Group Ltd (ASX: MQG) believes it could generate mouth-watering returns over the next 12 months.
The stock that Macquarie has given the thumbs up to is Graincorp Ltd (ASX: GNC).
It is a diversified and integrated Australian agribusiness that connects growers to domestic and international consumers in over 50 countries.
According to the note, the broker believes this ASX 200 stock is well-positioned to benefit from improving weather conditions. It said:
Winter rainfall in July & early Aug brought welcome relief to VIC, improving prospects for average yields; soil moisture profile now about avge. NSW & QLD conditions remain optimal with full winter plant programme and good soil moisture conditions. We U/G our expectations for 2025/26 winter crop to 28mt (prior 26mt, ABARES 27.2mt) driven by improvement in seasonal conditions. This underpins our FY26e EBITDA +5% vs prior est to $342m, 7% above $320m GNC TTC earnings est.
Though, it does acknowledge that its grain export business is battling depressed margins. The broker adds:
Margins remain depressed across GNC's grains export biz as wheat markets continue to face elevated global supplies; Nth hemisphere harvest up vs prior year. US peer 2Q results corroborate this noting depressed supply chain margins & "oversupplied" grain markets. Export vols tracking to upper end of GNC guidance range (6.5-7.5mt). We lower our fct by 0.3mt to 7.7mt on bookings slowdown in 4Q. [..] Some recent bullishness in Black Sea region with wheat prices lifting from lows on delays to Russian harvest. However, appears largely timing related and rally has not been sustained.
According to the note, the broker has retained its outperform rating on this ASX 200 stock with an improved price target of $9.10.
Based on its current share price of $7.93, this implies potential upside of 15% for investors over the next 12 months.
In addition, the broker is expecting a 6% dividend yield in FY 2025 and FY 2026, which boosts the total potential return beyond 20%.
Commenting on its buy recommendation, Macquarie said:
OP. Improvement in southern Aust seasonal conditions + optimal north increases likelihood of upgrades to ABARES ECA winter crop est and GNC FY26 earnings. Bal sheet rock solid with core net cash position underpinning GNC investment needs, ongoing divs and $75m on-foot buyback (~$36m complete).
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