After ASX mining shares crashed last week, top brokers are backing this miner

About Latest Posts Brendon LauBrendon's passion for shares started by accident in 2003 and he has worked in various roles …

| More on:
happy looking men working at a mine, indicating a share price rise for ASX resource shares

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX mining shares took one of their biggest drubbings last week, but top brokers reckon this is the time to buy this ASX miner.

The mining heavy materials sector was the worst performer on the ASX in the past week. The BHP Group Ltd (ASX: BHP) share price, Rio Tinto Limited (ASX: RIO) share price and Fortescue Metals Group Limited (ASX: FMG) share price led the falls.

Falling commodity prices were a large driver for the losses as the US dollar rallied on safe haven demand.

South32 share price could appeal to bargain hunters

But this could be the time to be bargain hunting. And several leading brokers reckon the South32 Ltd (ASX: S32) share price should be on your shopping list after it posted its full year results.

The analysts at Macquarie Group Ltd (ASX: MQG) is one that is recommending the ASX miner as a buy.

While the diversified miner's earnings were inline with the broker's forecast, its cash flow was better than Macquarie had anticipated.

Stronger cash and bigger dividends

"The strong result drove the additional capital returns to shareholders. S32 declared a final dividend of US¢5.5, which included a US¢2.0 special dividend," said the broker.

"The total payout for the year of US¢6.9 was 60% higher than we had anticipated. S32's share buy-back has been increased by US$120m with US$252m in total remaining."

Macquarie's 12-month price target on the South32 share price is $4 a share compared to the miner's Friday closing price of $2.78.

Missing expectations but hitting targets

But not everyone was impressed by South32's dividend. The payout missed JPMorgan's estimate of US6 cents a share. What's more, the miner's FY22 cost guidance for Worsley and Illawarra was above what the broker was expecting.

Nonetheless, these negatives weren't enough to convince JPMorgan to change its "overweight" recommendation on the shares as South32 still looks cheap.

"We believe S32 offers a compelling investment proposition as an inexpensive non-iron ore diversified miner," said JPMorgan.

"We also expect consensus to move higher on aluminium price strength. We retain our Overweight rating based on attractive P/NPV of 0.79x, strong balance sheet, and solid ~7% yield."

South32 share price boosted by its strong balance sheet

South32's attractive valuation was not lost on Morgan Stanley either. Even though the miner also failed to meet its lofty US7.9 cent a share dividend expectation, the broker remains a fan.

Morgan Stanley pointed to South32's strong balance sheet and better than expected cash flows as reasons to buy its shares.

The broker reaffirmed its "overweight" recommendation on the South32 share price and $3.40 a share price target.

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Fortescue Metals Group Limited, Macquarie Group Limited, Rio Tinto Ltd., and South32 Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Resources Shares

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Resources Shares

Down 14% in 2024, why is the BHP share price sliding again today?

ASX 200 investors are bidding down the BHP share price on Wednesday.

Read more »

A mining employee in a white hard hat cheers with fists pumped as the Hot Chili share price rises higher today
Resources Shares

These ASX 200 mining stocks could rise 40% to 50%

Analysts think these miners are dirt cheap at current levels.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Fortescue share price leaps 5% as electric machinery makes a milestone

Fortescue is charging ahead with its electric mining ambitions.

Read more »

rising mining asx share price represented by happy woman miner in hard hat
Resources Shares

Why the BHP share price crushed the benchmark this week

BHP shareholders enjoyed a rewarding week.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Dividend Investing

Here is the profit forecast to 2026 for BHP shares

Let’s unearth how much profit this miner could make.

Read more »

Female miner standing next to a haul truck in a large mining operation.
Resources Shares

Is the worst of the selling now over for ASX iron ore shares?

ASX iron ore giants like BHP, Rio Tinto and Fortescue rebounded this week after falling hard in 2024.

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Resources Shares

Why are ASX 200 mining shares smashing the benchmark on Wednesday?

Rio Tinto, BHP and Fortescue shares are all charging higher today.

Read more »

Two miners standing together.
Resources Shares

Why is the South32 share price getting battered today?

ASX 200 investors are bidding down South32 shares today.

Read more »