GrainCorp has demonstrated substantial resilience amid challenging market conditions, with 1H25 revenue growing 21.0% to $4,092.2M and underlying EBITDA increasing 23.2% to $202M. This recovery follows a challenging FY24 where NPAT declined 75.3%, reflecting the inherent cyclicality of agricultural operations. Management's disciplined approach to capital allocation has maintained financial flexibility while supporting both strategic growth initiatives and shareholder returns.

The company's strategic diversification beyond its cyclical grain handling core represents a differentiated approach among agricultural peers. The Animal Nutrition segment has emerged as a primary growth engine with volumes increasing 69.7% in 1H25, driven by the successful XFA acquisition and organic growth. The emerging renewable fuels opportunity through partnership with Ampol and IFM Investors potentially transforms the company's long-term margin profile.

Near-term prospects appear favorable, with management upgrading FY25 earnings guidance to underlying EBITDA of $285-325M, supported by continued momentum in Animal Nutrition and favorable rainfall patterns in northern growing regions. The company's through-cycle EBITDA target of $320M demonstrates confidence in structural margin improvement despite agricultural cyclicality, with business transformation initiatives expected to deliver 50-75bps margin enhancement by FY27.

GrainCorp Limited is a leading Australian agribusiness with over 100 years of history in the agriculture sector. The company operates an integrated supply chain that connects growers to consumers worldwide for food, feed, and agri-energy products. GrainCorp's operations span across Australia, particularly on the East Coast where it maintains over 160 grain receival sites and 7 port terminals.

The company generates revenue through two primary segments: Agribusiness and Nutrition & Energy. The Agribusiness segment earns income from grain storage, handling, transportation, trading, and export services, while also leveraging port infrastructure to handle non-grain bulk materials. The Nutrition & Energy segment represents a vertically integrated business focused on oilseed processing and value-added products, encompassing Human Nutrition, Animal Nutrition, and Agri-energy operations.

GrainCorp is led by Managing Director & CEO Robert Spurway, supported by an experienced leadership team with diverse expertise across agricultural supply chains, food manufacturing, finance, and corporate strategy. This leadership team enables the company to navigate industry challenges while pursuing growth opportunities in adjacent sectors.

GrainCorp delivered a solid half-year performance with revenue increasing 21.0% to $4,092.2 million and underlying EBITDA rising 23.2% to $202 million. This growth was primarily driven by increased grain receivals (+38.6%) in East Coast Australia, particularly in Queensland and Northern NSW, which offset below-average conditions in Victoria and Southern NSW.

The Agribusiness segment performed strongly with EBITDA of $141 million (up from $101 million), benefiting from higher ECA production volumes and capitalizing on export opportunities. However, the International business faced margin pressure due to strong global grain production. The Nutrition & Energy segment maintained stable performance with EBITDA of $75 million, despite achieving record canola seed crush volumes.

The company maintained a strong financial position with core cash of $296.4 million, supporting an interim dividend of 24 cents per share (fully franked) and allowing an increase in the share buy-back program to $75 million. Management upgraded FY25 guidance to underlying EBITDA of $285-325 million and underlying NPAT of $65-95 million, reflecting confidence in sustained improvement.

Our financial projections translate explicit assumptions into a detailed forecast that captures both seasonal patterns and underlying growth trends. Revenue growth follows different trajectories across segments, with Agribusiness (0-4% CAGR) more cyclical and tied to ECA production volumes, while Nutrition & Energy (3-6% CAGR) shows more stable growth supported by the XFA acquisition and potential crush capacity expansion.

EBITDA margin expansion from 5.0% to 5.5% is driven by three primary factors: the business transformation program expected to deliver 50-75bps improvement over the forecast period; the segment mix shift toward higher-margin Nutrition & Energy activities; and operational leverage from increased volumes across the fixed-cost infrastructure network. This margin progression is conservative relative to historical peak levels but reflects realistic expectations in the competitive global grain environment.

Capital expenditure and working capital assumptions reflect GrainCorp's differentiated segment characteristics. Capex intensity of 1.1% is below agricultural processing averages, reflecting the mature infrastructure base with focused growth investments. Working capital patterns showcase dramatic seasonal swings, with significant cash outflows during harvest periods followed by substantial inflows during export periods.

Our base case DCF yields a valuation of $10.76 per share, representing 17% upside from the current price of $9.20. This valuation is derived from enterprise value of $2,072 million plus core cash of $296 million, divided by approximately 220 million shares outstanding. The DCF model appropriately captures GrainCorp's long-term cash generation capacity while smoothing the cyclical and seasonal fluctuations inherent in agricultural operations.

The multiple-based approaches provide important cross-validation: the through-cycle EV/EBITDA multiple of 7.5x applied to management's target EBITDA of $320 million yields a value of $12.26 per share, while the normalized P/E multiple of 15.0x produces a value of $10.50 per share. These approaches corroborate our DCF findings while highlighting potential for additional upside if the market recognizes GrainCorp's improved business mix and reduced earnings volatility.

The overall valuation range of $10.00-$12.00 represents a balanced perspective that gives greater weight to forward-looking methodologies while acknowledging consensus expectations. This range positions GrainCorp at a modest premium to agricultural peers when evaluated on a through-cycle basis, justified by its dominant infrastructure position and strategic diversification into higher-margin businesses.

Climate variability remains GrainCorp's most significant risk exposure, with recent patterns showing strong production in Queensland/Northern NSW against weaker Victorian conditions creating operational inefficiencies. While strategic diversification into non-grain businesses partly addresses this risk, core earnings remain heavily influenced by ECA production volumes.

The global grain supply/demand imbalance presents ongoing challenges, with strong global production creating margin pressure despite volume growth. Management's mitigation approach focuses on leveraging the integrated supply chain and diversifying into less cyclical businesses, though success depends on effective execution of the transformation strategy.