The South32 Ltd (ASX: S32) share price is pushing higher on Friday afternoon.
At the time of writing, the mining giant's shares are up 1% to $3.53.
This means the South32 share price is now up 41% in 2021.
Is it too late to invest?
The good news for investors is that one leading broker doesn't believe it is too late to invest and still sees plenty of upside left in the South32 share price.
According to a note out of Goldman Sachs this morning, the broker has retained its conviction buy rating and $4.40 price target.
Based on the current South32 share price, this implies potential upside of almost 25% for investors. And that's before dividends! More on that in a minute.
Why is Goldman bullish on the South32 share price?
Goldman has named four key reasons why it is bullish on the South32 share price.
The first reason is its valuation. It highlights that the company's shares are trading at ~0.9x NAV excluding the proposed acquisition of Sierra Gorda. This is notably lower than some of its peers.
The second reason is its strong free cash flow outlook. Driven mostly by its exposure to base metals such as aluminium and alumina, Goldman is forecasting a free cash flow yield of 16% to 18% over the next two years.
This strong free cash flow leads onto the third reason Goldman is bullish. The broker believes South32 will be in a position to extend its US$250 million share buyback and pay big dividends to shareholders. In respect to the latter, the broker is forecasting dividend yields of 12% to 13% in FY 2022 and FY 2023.
Finally, a fourth reason to be positive is South32's positive project newsflow.
Goldman commented: "We would see the commitment to the restart of the Alumar aluminium smelter as a positive (c. 6% upside to EBITDA), and highlight the potential for capex on the US$800mn Dendrobium next domain (DND) met coal project to be reduced (which we would view as a positive). S32 is currently selling a base metal royalty portfolio (no value in our model), and is due to release the PFS results from the Hermosa zinc/silver/lead project (GS NPV US$1.1bn) in Arizona in Nov/Dec."
All in all, the broker believes South32 share price is one of the best buys in the resources sector right now.
