BHP Group Ltd (ASX: BHP) shares have just found a new bull.
And according to the broker, investors should be snapping up the Big Australian's shares before it's too late.
Who is bullish on BHP shares?
The broker in question is Goldman Sachs.
According to a note out of the investment bank, its analysts have reinstated coverage on the miner with a buy rating and $49.00 price target.
Based on the current BHP share price of $44.05, this implies potential upside of 11.2% for investors over the next 12 months.
But that isn't the end of the returns. Goldman is forecasting fully franked dividend yields of 4.9% in FY 2024 and then 4.3% in FY 2025.
This stretches the total potential 12-month return from BHP shares to around 16%.
Why should you invest?
Goldman has named a few reasons why it thinks investors should be picking up the mining giant's shares today. One is its attractive valuation. It said:
BHP is currently trading at ~6.0x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a slight premium to RIO on ~5x; both are trading at ~0.9xNAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium 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).
The miner's exposure to copper is another reason to invest according to the broker. It adds:
We remain bullish on copper and expect BHP to generate US$6.8bn in copper EBITDA in FY24 (27% of EBITDA) and almost doubling to US$11.5bn in FY25 (41% of EBITDA) due to ongoing supply side challenges and increasing demand.
In addition, Goldman highlights that the company has a significant growth opportunity in copper despite its recent failure to acquire Anglo American (LSE: AAL). It said:
We continue to believe that BHP's major opportunity is growing copper production in Chile at Escondida and Spence, and growing production and capturing synergies in South Australia between Olympic Dam and the previous OZL assets. We think BHP has a competitive edge in copper heap leaching and believe it can potentially fill ~200ktpa of spare cathode capacity by 2030 and possibly the full ~315ktpa spare capacity by 2035.
Overall, this could make BHP shares a great option for investors that are looking for some mining sector exposure for their portfolio this month.
