Should you buy BHP shares following the miner's half-year results?

Should you be snapping up this mining giant's shares? Here's what this broker thinks.

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BHP Group Ltd (ASX: BHP) shares are under pressure on Wednesday.

At the time of writing, the mining giant's shares are down over 3% to $44.04.

Why are BHP shares falling?

Investors have been hitting the sell button today after the price of iron ore tumbled during overnight trade.

As we covered here, the spot benchmark iron ore price fell 5% overnight to US$120.85 a tonne in response to concerns over weak economic growth in China.

Is this a buying opportunity?

The team at Goldman Sachs is likely to see this as a buying opportunity for investors.

This morning, the broker responded to BHP's half-year results release by retaining its buy rating and $49.40 price target on its shares.

Based on the current BHP share price, this implies potential upside of approximately 12% over the next 12 months.

In addition, the broker is forecasting fully franked dividends of US$1.45 per share (A$2.21 per share) in FY 2024. This equates to a 5% dividend yield based on where its shares trade at present.

Commenting on the results, the broker said:

BHP reported a broadly in-line 1H FY24 result with underlying EBITDA/NPAT of US$13.9bn/US$6.6bn, -3%/-3% vs. our estimates but broadly in-line with Visible Alpha consensus. The interim div of US72c (56% payout) was broadly in line with GSe at US74c (55% payout). Net debt of US$12.6bn was pre-guided and was in-line with our US$12.7bn estimate. FY24 production & cost guidance is unchanged and medium-term capex guidance of US$11bn was reaffirmed.

And while the miner's capex spending for the Jansen Potash project was higher than expected, Goldman highlights that management is being disciplined with its spending. This includes deferring its spending on the new concentrator at Escondida by one to two years. It adds:

BHP provided the capex profile for both stages at Jansen, with capex front end loaded vs expectations over the medium term at US$2-2.5bn pa in FY25-27 vs GSe/Cons at c.US$1.5bn pa. So whilst the Escondida concentrator deferral is a surprise, it shows BHP remains disciplined within its US$11bn pa capex target. Deferral may also alleviate the execution risk that may emerge with trying to deliver a major project at a time when peers have seen major challenges.

All in all, the broker believes that BHP shares have an "attractive valuation" and retains its buy rating.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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