BHP Group Ltd (ASX: BHP)  

BHP Ltd is a global resources company headquartered in Melbourne, Australia. It operates in various sectors, primarily focusing on the extraction and production of minerals and energy resources. BHP's key operations include mining for iron ore, copper, coal, and petroleum, with significant assets located in Australia, the Americas, and beyond.

Recommendation Rationale – SELL at AUD 43.560

• Trading Around Resistance: BHP’s share price is hovering around the ‘Resistance 1’ level recommended on 9 September 2024; thus, share price can face resistance at the current levels.
• Technical Standpoint: Given that the 14-day RSI is currently around 69.87 level, indicating it is approaching the overbought zone and can face retracement in the short term.
• Overvalued Multiples: On a forward 12-month basis, EV/EBITDA, Price/Book, and Price/Earnings multiples are higher than the average of Metals & Mining industry.
• Operational Challenges: The suspension of Western Australia Nickel operations due to global oversupply highlights the potential for operational challenges. Such decisions can impact employee morale and community relations.
• Profit Decline: During FY24, attributable profit and profit from operations decreased by 39% and 24% YoY, respectively.
  

BHP Daily Chart

 (Source: REFINITIV; Analysis by Kalkine Group) 

Valuation Methodology: Price/Earnings Approach (FY Jun'25E) (Illustrative)

BHP is likely to trade at a slight premium on the back of consistent growth in copper volumes; 3% and 4% YoY growth in Revenue and Underlying EBITDA, respectively. The following peers have been considered for conducting valuation: Fortescue Ltd (ASX: FMG), Iluka Resources Ltd (ASX: ILU), and Santos Ltd (ASX: STO).

Given its current trading levels, market uncertainties, and risks associated, the share price can witness resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 43.560, as of 26 September 2024 at 12:25 PM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 26 September 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement.   

Technical Indicators Defined: -

Support: A level at which 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 at which 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: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.