Stock Analysis & Valuation BHP Group Limited (BHP.SW)

• Previous Close: CHF27.62
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, CHF	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)		n/a
Graham-Dodd Method		n/a
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

BHP Group Limited (BHP.SW) is a global leader in the mining and resources sector, headquartered in Melbourne, Australia. Operating across multiple continents, BHP specializes in the extraction and production of essential industrial materials, including copper, iron ore, coal, nickel, and potash. With a history dating back to 1851, BHP has established itself as a cornerstone of the basic materials sector, serving critical industries such as construction, manufacturing, and energy. The company's diversified portfolio and vertically integrated operations—spanning mining, smelting, refining, and logistics—ensure resilience against commodity price volatility. BHP's commitment to sustainable mining practices and strategic investments in high-demand resources like copper (vital for renewable energy) positions it as a key player in the global transition to a low-carbon economy. Listed on the Swiss Exchange (SIX), BHP remains a top choice for investors seeking exposure to industrial materials with strong cash flows and dividend potential.

Investment Summary

BHP Group Limited presents a compelling investment case due to its diversified commodity portfolio, strong cash flow generation (CHF 20.7B operating cash flow in FY 2024), and disciplined capital allocation (CHF 1.19/share dividend). The company's low beta (0.88) suggests relative stability compared to broader markets, while its focus on copper and potash aligns with long-term decarbonization trends. However, risks include exposure to cyclical commodity prices (evidenced by a 29% YoY decline in net income to CHF 7.9B) and geopolitical uncertainties in mining jurisdictions. With a robust balance sheet (CHF 12.4B cash vs. CHF 20.2B debt) and CHF 8.8B in capital expenditures driving growth, BHP is well-positioned but remains sensitive to global industrial demand fluctuations.

Competitive Analysis

BHP's competitive advantage stems from its unmatched scale in tier-1 mining assets, particularly in iron ore (Pilbara) and copper (Escondida). The company operates some of the world's lowest-cost mines, with iron ore C1 costs under $15/ton, providing a margin buffer during downturns. Its vertical integration in logistics (owning rail and port infrastructure in Australia) reduces third-party dependencies. Unlike pure-play miners, BHP's diversification across copper (future-facing commodity) and coal (cash cow) balances growth and income. However, its reliance on joint ventures (e.g., Escondida) dilutes operational control compared to rivals like Rio Tinto. BHP's early-mover advantage in potash (Jansen project) could yield first-mover benefits as demand for fertilizer inputs grows. ESG performance is a differentiator—BHP leads peers in Scope 1 & 2 emission reduction targets but faces stiff competition from Vale in high-grade iron ore and Glencore in copper trading networks. The Swiss listing provides currency diversification but may limit visibility compared to primary ASX-listed peers.

Major Competitors

• Rio Tinto plc (RIO.L): Rio Tinto rivals BHP in iron ore dominance (Pilbara operations) but has less copper exposure. Strengths include industry-leading automation and lower debt (12% net debt/EBITDA vs. BHP's 18%). Weaknesses include reliance on iron ore (70% of EBITDA) and slower progress in potash. Rio's Simandou iron ore project could challenge BHP's cost advantage post-2025.
• Vale S.A. (VALE3.SA): Vale is BHP's primary competitor in high-grade iron ore (Carajás mines) and nickel. Strengths include premium iron ore pricing (65%+ Fe content) and growing copper output (Salobo). Weaknesses include higher geopolitical risk (Brazilian operations) and lingering liabilities from the Brumadinho dam disaster. Vale's weaker ESG reputation contrasts with BHP's sustainability initiatives.
• Glencore plc (GLEN.L): Glencore surpasses BHP in copper volumes and owns critical trading networks. Strengths include integrated mining/trading model and cobalt leadership (key for EVs). Weaknesses include higher debt (net debt/EBITDA ~1.5x) and exposure to thermal coal, which BHP has exited. Glencore's trading arm provides countercyclical stability but lacks BHP's operational focus.
• First Quantum Minerals Ltd. (FM.TO): A pure-play copper competitor, First Quantum operates high-grade mines (Cobre Panama) but lacks BHP's diversification. Strengths include lower-cost copper production ($1.50/lb vs. BHP's $1.65/lb). Weaknesses include single-commodity risk and recent political instability in Panama. BHP's scale provides better financing options for new projects.
• Newmont Corporation (NEM): Newmont competes indirectly via gold/copper assets (Peníasquito). Strengths include gold's safe-haven status and industry-leading reserves. Weaknesses include higher AISC ($1,200/oz gold) and no iron ore exposure to balance volatility. BHP's broader commodity mix offers better macroeconomic hedging.