Insights

Up 36%, why the BHP (ASX:BHP) share price has beaten the ASX 200 in the last year

The ASX’s second largest company has enjoyed major tailwinds over the past year.
The post Up 36%, why the BHP (ASX:BHP) share price has beaten the ASX 200 in the last year appeared first on The Motley Fool Australia. –

The BHP Group Ltd (ASX: BHP) share price has been a stellar performer over the last 12 months. The Australian-based mining giant outpaced the S&P/ASX 200 Index (ASX: XJO) by around 14% when looking at 1-year returns.

Although the BHP share price slipped on Friday, it isn’t far from reaching its all-time high of $51.82 achieved in May. At the market close, the mining company’s shares were trading at $49.48.

What’s moving the BHP share price?

Investors have continued to snap up the world’s largest mining company’s shares on the back of rising iron ore prices.

BHP has been busy capitalising on the strong price of the steel-making ingredient, pumping out record year-to-date production. The company reported 188.3 million tonnes of iron ore produced, a 4% lift when compared to March 2020. Current FY21 guidance of the metallic iron is estimated to come around at 245 million tonnes to 255 million tonnes.

Meanwhile, the iron ore price has skyrocketed to US$216.32 per tonne, closing in its record-high of $218.38 in December 2020. The rise has provided bumper profits for BHP, producing the steel-making material at a cash cost of less than US$15.00 per tonne.

What about the Chinese demand?

It’s no secret that China has taken punitive economic measures after Australia called for an inquiry into the origin of COVID-19. In the period since, China has imposed tariffs or restrictions on Australian coal, barley, wine, red meat, cotton, timber, and even lobsters.

However, China’s reliance on Australian iron ore is well known, with the country buying around 60% of the commodity from us last year. This equates to more than $80 billion, with a large portion of that going into BHP’s coffers.

Reports have surfaced that China is focusing on promoting domestic production, as well as exploiting untapped deposits in Africa. Fortunately for Australia and BHP, this is easier said than done. Based on the sheer scale of Chinese demand, this would take at least a number of years to produce anything near the iron ore it currently receives.

What do the brokers think?

After reporting its third-quarter results in April, a number of brokers rated the company with varying price points.

Global investment house Goldman Sachs raised its price target for BHP by 1.3% to $54.20. Macquarie followed suit to also increase its rating by 3% to $63.00.

The most recent broker note came from Morgan Stanley two weeks ago, which has initiated a price of $50.70 for the mining outfit.

BHP share price snapshot

The BHP share price has gone from strength to strength over the past year, rising around 36%. The company’s share price is in the upper end of its 52-week range of $33.73 to $51.82.

On valuation grounds, BHP commands a market capitalisation of roughly $145 billion, with approximately 2.9 billion shares on issue.

The post Up 36%, why the BHP (ASX:BHP) share price has beaten the ASX 200 in the last year appeared first on The Motley Fool Australia.

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More reading

5 things to watch on the ASX 200 on Friday

Can the ASX 200 hit 8,000 points by the end of the year?

Mining shares in the ASX 200 might unearth US$26b worth of dividends

The BHP Group share price is rising again — so where to from here?

Here’s what leading brokers are saying about the BHP (ASX:BHP) share price in July 2021.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Bruce Jackson.

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