Keypoints Our1HFY23 headline forecasts are in line with Vuma consensus,with lower HoH earnings reflecting commodity price movements.
We have forecast an interim dividend of US$0.97, which ishigher than Vuma consensusof US$0.88(range of US$0.76–1.05).
The buoyant iron ore and copper prices present valuation upside to BHP, with FY23–25Eearnings 11–42% higher at spot prices.
Event •We preview BHP’s1HFY23earnings ahead of its results announcement before market open on 21 February2023.
Impact •Earnings performance to reflect commodity prices:BHP has releasedits Vuma consensus results for 1HFY23. Our forecasts for revenue and Ebitda are all within 1% of Vuma consensus, while ou runderlying NPAT is 4% lower than the consensus average. Our revenue forecast of US$25.9b is 15% lower YoY,while the underlying Ebitda of US$13.8b and underlying NPAT of US$6.6bare25% and 39% lower than the prior year, respectively.
•Interim dividend supportedby a strong balance sheet:BHP’s balance sheet remains strong, and we have forecast an interim dividend of US$0.97/sh which is 10% higher than consensus of US$0.88/sh (consensus range is US$0.76–1.05).Our forecast interim dividend has assumed a payout ratio of 75%, largely in line withthe averagepayout ratio inrecent years (71% for 1H FY22 and 83% for 2HFY22).
•Earnings upside at spot prices: The recent rebound in commodity prices presents upside risk to BHP’s Ebitda,with contribution fromthecopper and iron ore divisions. There are earnings headwinds from coal given the recent decline in thermal coal prices, which is partially offset byhighercoking coal prices. Earningsand target pricerevision •No changes.
•Catalyst:Further updates on future organic and inorganic growth plans present a key catalyst for BHP.
Action and recommendation •Maintain Outperform: We expect solid1HFY23 results,with a sequential decline largely reflecting movements in commodity prices in the past six months.Our headline financia lforecasts arealsoin line with Vuma consensus.
Capital spending and working capital movements could be swing factors and we believe are key to watch.The recent rebound in commodity prices presents upside risk to BHP’s Ebitda,with contribution from copper and iron ore divisions.In a spot price scenario, earnings are 11–42% higher than our base case for FY23–25E
BHP Price at posting:
$47.93 Sentiment: Buy Disclosure: Held
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