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.
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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.
