BHP Group Limited

BHP Details
 
Copper Production Soared 7% Year over Year in 1HFY20: BHP Group Limited (ASX: BHP) is engaged in the production, manufacturing & exploration of minerals. Recently, the company announced that Gary Goldberg, one of the Directors of the company, has acquired 3,000 ADSs (indicating 6,000 ordinary shares) for a consideration of USD 51.52 per ADS. In another update, the company stated that Susan Kilsby, another Director of the company, acquired 4,000 ordinary shares for a consideration of GBP 16.96 per share.
 
1HFY20 Key Financial Highlights for the Period Ended 31 December 2019: The company’s total revenues for the period came in at US$22,294 Mn, up by 3% year over year. Underlying EBITDA for the period stood at US$12,084 million, up 15% year over year. For 1HFY20, copper production of the Group increased by 7% with total production of 885 kt. The company declared an interim dividend of 65 US cps during the period, soaring 18% year over year.
 

Key Financial Highlights (Source: Company Reports)
 
What to Expect:For FY20, the company is anticipating total petroleum production in the ambit of 110 and 116 MMboe, and total copper production is likely to be in the band of 1,705kt and 1,820 kt.
 
Valuation Methodology: P/E Multiple Based Relative Valuation
 
 P/E Multiple Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation:As per ASX, the stock is trading close to its 52-week low level of $31.88. The company has a market cap of $98.45 billion as on 6 March 2020. Annual dividend yield of the stock stands at 6.31%. We have valued the stock using P/E based relative valuation method and arrived at a target price offering an upside of lower-double digit (in percentage terms). For the purpose, we have taken peers like Rio Tinto Ltd (ASX: RIO), Newcrest Mining Ltd (ASX: NCM), Iluka Resources Ltd (ASX: ILU), to name few. Hence, considering the aforesaid facts and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $32.19 per share, down 3.68% on 6 March 2020.

 
BHP Daily Technical Chart (Source: Thomson Reuters)
 
 

Rio Tinto Limited

 

RIO Details
 
Expects Recovery in FY20 Amid Coronavirus Impact: Rio Tinto Limited (ASX: RIO) is involved in the production of copper, gold, iron ore, coal, aluminium, borates, titanium dioxide and other minerals. Recently, the company announced that it will distribute a dividend of $3.4974 per share, with a payment date of April 16, 2020.
 
FY19 Key Financial Highlights: The company recently declared its operational results for FY19, wherein the company reported Pilbara iron ore shipments of 327.4 Mt, down by 3% and Pilbara iron ore production of 326.7 Mt, a decline of 3% on y-o-y basis. Gross revenues for the period stood at US$45.4 billion, up 6% year over year, mainly driven by higher iron ore prices. Underlying EBITDA came in at US$21.2 million, up 17% year over year, whereas free cash flow for the period increased 42% and came in at US$10 billion in the same time span.
 

FY19 Key Highlights (Source: Company Reports)
 
Outlook: As per the FY20 guidance, the company expects Covid-19 outbreak to impact business prospects in the near-term. Further, geopolitical tensions and oil price volatility is expected to impact the performance, while iron ore shipments and bauxite production guidance are subject to weather and market conditions. The group expects its Pilbara iron ore shipments for FY20 within the band of 324 million tonnes and 334 million tonnes. The company is working with its customers to lower any interruption in supply.
 

2020 Guidance (Source: Company Reports)
 
Valuation Methodology:P/E Multiple Based Relative Valuation

 P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of RIO is quoting at $86.25 with a market capitalisation of $32.83 billion. The stock is trading at the lower band of its 52-week trading range of $82.42 - $107.79.The stock has delivered negative returns of 1.75% and 3.17% in the last six months and one year, respectively. Annual dividend yield of the stock currently stands at 6.43%. Considering the current trading levels and FY20 Guidance, we have valued the stock using Price to Earnings based relative valuation method. For the purpose, we have taken peers like South32 Ltd (ASX: S32), Whitehaven Coal Ltd (ASX: WHC), and BHP Group Ltd (ASX: BHP), to name few, and arrived at a target price with limited upside (in % terms). Hence, we have a watch stance on the stock at the current market price of $86.25 per share, down 2.487% on 06 March 2020.
 
 
RIO Daily Technical Chart (Source: Thomson Reuters)

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