Down over 10% in 10 days: Is the BHP share price a bargain buy now?


The BHP Group Ltd (ASX: BHP) share price has fallen by more than 10% in the last ten days.

As the biggest business on the ASX, the movement of the BHP share price has the most influence on the S&P/ASX 200 Index (ASX: XJO).

After a double-digit fall in a short period of time, is this a chance to buy the dip?

Last week, BHP released its operational update.

BHP told ASX investors that it was reducing its full-year total copper production guidance to between 1,570kt to 1,620kt, reflecting lowered production guidance for Escondida.

BHP also reduced its full-year nickel production guidance to between 80kt to 85k due to COVID-related labour constraints.

Its iron ore production for the three months to 31 March 2022 was 10% lower quarter on quarter to 59.7mt. The company explained that the reduction was due to temporary labour constraints due to COVID-19, train driver shortages, and planned maintenance activities.

The Queensland metallurgical coal business delivered “strong underlying performance” amid record-high prices.

BHP also revealed that its Jansen potash project is “on track, with good progress on the shafts, in the underground mining systems and at the port.”

Inflation may be pushing commodity prices higher, but BHP said it’s working on mitigating increases in its own costs. It noted that market volatility and inflationary pressures have “further increased” because of the Russian invasion of Ukraine. BHP is working on the cost pressures “through a sharp focus on operational reliability and cost discipline”.

It’s expecting conditions to improve during the 2023 calendar year. But the skills shortages and overall labour market tightness in Australia and Chile is likely “to continue in the period ahead.”

Some brokers think it is. Macquarie is still very positive with an outperform rating and a price target of $60. This is because elevated resource prices should help the ASX 200 mining share keep generating profit. That implies a potential upside of around 30%.

Citi is another broker positive on BHP, with a buy rating. While it recognises that the quarter BHP just reported wasn’t as good as hoped, the resources giant is still making a lot of profit. It increased its price expectations for iron in the shorter term. Citi has a price target of $56 on BHP shares.

But not every expert is convinced. The broker Credit Suisse is neutral on BHP with a price target of $48. UBS is also neutral with a price target of $43. That suggests a possible single-digit decline over the next year. UBS is expecting less profit due to headwinds relating to costs and production. Plus, resource prices could ease in the medium term.

At the time of writing, the BHP share price is $47.68, up 3.65% so far today.

Dividend expectations

Using Credit Suisse’s projections, the Big Australian could pay a 14.5% grossed-up dividend yield in FY22 and 8.6% in FY23.

Source: Read More

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