BHP Group Ltd (ASX: BHP) shares were under pressure on Thursday.
The mining giant's shares ended the day almost 2% lower at $45.73.
This was driven by the release of a quarterly update which fell a touch short of the market's expectations.
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Should you buy BHP shares?
One leading broker that believes investors should buy the dip is Goldman Sachs.
According to a note, the broker has responded to the Big Australian's quarterly update by retaining its buy rating with a trimmed price target of $49.40.
Based on its current share price, this implies potential upside of 8% for investors over the next 12 months.
And with Goldman forecasting a 5% dividend yield in FY 2024, the total potential return stretches to 13%.
What did the broker say?
Goldman wasn't overly impressed with BHP's quarterly update but has seen enough to remain positive. It said:
BHP reported a slightly weaker than expected Dec Q with copper and met coal production -6%/-9% vs. GSe but iron ore production/shipments of 72.7/70.3Mt were in-line with GSe. FY24 guidance is unchanged except for met coal, which has been cut by ~20% to 23-25Mt. Copper realised pricing for Dec H was +3% vs GSe, iron ore in-line, while coal and nickel pricing were lower than GSe reflecting product realisations and sales timing.
The broker also believes BHP's shares deserve to trade at a premium to peers due to its superior operations. It adds:
BHP is currently trading at ~6.0x NTM EBITDA, (25-yr average EV/EBITDA of ~6-7x) vs. RIO on ~5.5x. BHP is trading at 0.95x NAV (A$48.6/sh), vs. RIO at ~0.9x NAV. That said, we believe this premium vs. peers can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers), high returning copper growth, and lower iron ore replacement & decarbonisation capex.
