Equity Value of BHP
Is BHP a buy at current levels ? What is relative investment in iron ore compared to copper. What will be the driver of the share price over the next 2 or 3 years.
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Answer
Hi Brett,
Revenue for FY24 was made up of Iron Ore $28bn (50%), Copper $20b (36%) and coal $7.8bn (14%). However moving forward the focus includes investments in copper expansion, particularly in South Australia and Chile, and the development of potash projects to diversify its commodity base. This aligns with BHP’s strategy to position itself towards future facing commodities.
- MM likes BHP below $40 although we must acknowledge it feels “heavy” while sentiment is bearish towards the Chinese economy.
Ultimately BHP is a cyclical business with over 60% of its revenue coming from China in FY24 illustrating its short-term dependency on the worlds 2nd largest economy. Our stance through 2024 of buy under $40 and sell above $50 is being challenged into Christmas as investors worry about the impact of “Trumps Tariffs”. The direction of commodity prices (Copper & Iron Ore the main ones) will dictate BHP’s earnings and thus share price from here.
