The BHP Group Ltd (ASX: BHP) share price is trading lower on Thursday afternoon.
At the time of writing, the mining giant's shares are down almost 1.5% to $42.43.
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Why is the BHP share price falling today?
The softness in the BHP share price appears to have been driven by broad weakness in the resources sector today, with almost all of BHP's peers in the red this afternoon.
In addition, investors may be wondering how to value BHP now that its petroleum assets have been demerged into Woodside Energy Group Ltd (ASX WDS).
Well, the good news is that analysts at Morgans have been running the rule over BHP sans petroleum and they believe the BHP share price offers plenty of value at the current level.
According to the note, the broker has an add rating and $48.30 price target on the Big Australian's shares. This implies potential upside of almost 14% for investors over the next 12 months.
In addition, the broker is forecasting fully franked dividends per share of $3.95 in FY 2022. This equates to a very attractive dividend yield of 9.3%.
What did the broker say?
Morgans notes that while the demerger has concentrated BHP's earnings, it has boosted its ESG profile.
The broker explained:
In terms of BHP's altered earnings mix by commodity post the Petroleum divestment (where Petroleum had been 11% of EBITDA in FY22F), BHP's new EBITDA breakdown by commodity according to our estimates is as follows: iron ore now 54% (was 49%), Copper now 25% (was 23%), Coal now 18% (was 16%) and Nickel now 2% (was 1.3%).
Other than rebasing our expectations for life without the contribution from its Petroleum business our investment view on BHP is unchanged. We continue to see the move as likely to increase the amount of global and domestic investors willing to invest in the company, something that will be further aided by the eventual divestment of its remaining thermal coal assets.
All in all, Morgans appears to believe the BHP share price is trading at an attractive level for investors and I would have to agree. Particularly given its world class operations and favourable commodity prices, which are underpinning bumper free cash flows.
