BHP Group Ltd (LSE: BHP)

BHP Group Ltd (LSE: BHP) is an Australia-based resources company. The Company is a producer of commodities, including iron ore, copper, nickel, potash and metallurgical (steelmaking) coal. It is focused on offering a range of resources, which provides copper for renewable energy; nickel for electric vehicles; potash for sustainable farming, and iron ore and metallurgical coal for the steel needed for global infrastructure and the energy transition. Its segments include Copper, Iron Ore, and Coal. This Report covers the Key Recommendation Rationale, and Conclusion on the stock.

Key Recommendation Rationale – Sell at GBX 2,086.00

• Resistance near Current levels: BHP’s stock price has almost touched Resistance (R2) which was stated in the previous report on 18 June 2025 therefore, there can be a possibility of a decline from resistance levels. Considering the market conditions and the price action, it is prudent to exit the stock.
• Free Cash Flow and Debt Management Trends May Warrant Closer Monitoring - While BHP continues to generate substantial operational cash flows and maintains a robust balance sheet, the 55% decline in free cash flow (from US$11.9 bn in FY24 to US$5.3 bn in FY25) combined with an increase in net debt to US$12.9 bn may prompt stakeholders to closely watch how future capital expenditure plans align with market volatility. With significant growth investments underway, including in potash and copper projects, some may see increased reliance on debt and reduced cash reserves as elements that could require more cautious financial navigation if commodity prices soften or timelines shift.
• Long-Term Copper Supply Expansion Relies on Execution and External Factors - BHP’s ambitious copper growth strategy, particularly targeting ~2 Mtpa of attributable copper production during the 2030s, reflects decent demand projections. However, some observers may view this as contingent on successful delivery of complex, capital-intensive projects in regions with evolving regulatory, environmental, and social landscapes. Delays in permitting, community engagement challenges, or broader geopolitical shifts may influence the pace or feasibility of execution, thereby affecting long-term output targets and return expectations.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

BHP Daily Technical Chart, Source - Refinitiv

Conclusion

BHP is expected to trade at a discount, considering Decline in Free Cash Flow, Increase in net debt, and fears of global slowdown. For conducting the valuation, the following peers have been considered - South32 Ltd (LSE: S32), Antofagasta PLC (LSE: ANTO) and others.

Given its current trading levels, Long-Term Copper Supply Expansion Relies on Execution and External Factors, recent rally in the share price, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current Market Price of GBX 2,086.00 as of 26 August 2025 at 08:00 AM GMT+1.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 26 August 2025. 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: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.