BHP Group Limited

BHP Details

BHP Group Limited (ASX: BHP) produces essential commodities with the help of its assets, including iron ore, copper, nickel, metallurgical coal, potash as well as petroleum.

Result Performance (FY21 Ended 30 June 2021)

• Revenue of the company for the period stood at $60.82 billion, an increase of 42% on previous year. The company’s performance over the past year reflects the strength of the portfolio, balance sheet, people as well as performance culture.
• Profit after taxation attributable to the members of the BHP Group stood at $11.30 billion, an increase of 42% on previous year. Attributable profit of US$11.3 billion in FY2021 includes an exceptional loss of US$5.8 billion mainly related to the impairments of the potash as well as energy coal assets, and the current year impact of the Samarco dam failure.
• The Board of Directors declared a record final dividend of US$2.00 per share, bringing BHP’s returns to shareholder to more than US$15 billion for the full year.

Key Data (Source: Company Reports)

Recent Update:

• On 14 September 2021, the company announced that Susan Kilsby and Anita Frew will retire after the BHP Group Limited and BHP Group Plc 2021 Annual General Meetings.
• On 2 September 2021, the company announced the appointment of Michelle Hinchliffe to the BHP Board as an independent Non-executive Director with effect from 1 March 2022.
• Recently, the company provided update related to all-cash offer for Noront Resources Limited. BHP has acknowledged the Wyloo’s non-binding proposal to acquire the Noront shares. BHP has also highlighted for Noront shareholders the uncertain as well as conditional nature of the Wyloo proposal, and noted that the BHP Offer happens to be the only transaction currently available to the Noront shareholders.

Outlook:

The company approved US$5.7 billion (C$7.5 billion) in capital expenditure for the Jansen Stage 1 (Jansen S1), which includes funding for the required port infrastructure. The company is expected to continue to drive performance and unlock value by improving productivity and reliability across the supply chain through implementing maintenance centre of excellence best practices, new technology solutions and ongoing automation.

(Source: Company Reports)

Key Risks:

• Foreign Exchange Rate Risk: The company faces the risk of dealing in multiple currencies, AUD, USD, and Chilean Peso (CLP). Therefore, any adverse movement in exchange rates may impact the broader performance.  
• The company is also exposed to the risks related to the significant social or environmental impacts.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation: 

The stock price of the company witnessed a fall of ~17.5% in 1 month. It has a 52-week low and high price of $33.730 and $54.550, respectively.

The stock has been valued using EV/Sales multiple-based illustrative relative valuation and a target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average) considering increase in profit from operations in FY 2021 on the YoY basis as well as decent outlook.

Considering the aforesaid facts, we give a ‘Buy’ rating on the stock at the current market price of $36.870 per share, down by 2.254% as on 28^th September 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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

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