DCF Studio

BHP.AX · ASX · Basic Materials

BHP Group Limited

Implied value per share

AUD 33.93

Market price

AUD 60.52

Implied upside

-43.9%

5y forecast · perpetuity growth TV · mid-year discounting · base case · USD model at 1.4233

AdjustedAccounts are reported in USD but the shares trade in AUD. The model runs in USD and converts once, at the end.
AdjustedCapital expenditure runs at 13.9% of revenue against depreciation of 9.6%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

Value Per Share

Perpetuity growth
AUD 33.93-43.9%
Exit multiple
AUD 51.67-14.6%
Market price
AUD 60.52

Same forecast, different terminal treatment. Percentages vs price.

Forecast Cashflows

Reporting currency (USD). Outflows negative.

0bn6bn12bnFY26FY27FY28FY29FY30
Nominal FCFFDiscounted to todayUSD
LineFY26FY27FY28FY29FY30CAGR
RevenueUSD 47.3bnUSD 43.7bnUSD 40.4bnUSD 37.3bnUSD 34.4bn-7.7%
EBITUSD 20.1bnUSD 18.5bnUSD 17.1bnUSD 15.8bnUSD 14.6bn-7.7%
NOPATUSD 14.1bnUSD 13.0bnUSD 12.0bnUSD 11.1bnUSD 10.2bn-7.7%
Add depreciation & amortisationUSD 4.6bnUSD 4.2bnUSD 3.9bnUSD 3.6bnUSD 3.3bn-7.7%
Less capital expenditureUSD -6.6bnUSD -6.1bnUSD -5.6bnUSD -5.2bnUSD -4.8bn-7.7%
Less increase in working capitalUSD 424.1mUSD 391.6mUSD 361.6mUSD 333.9mUSD 308.4m+7.7%
Free cashflow to firmUSD 12.4bnUSD 11.5bnUSD 10.6bnUSD 9.8bnUSD 9.0bn-7.7%
Discount factor0.95490.87060.79380.72380.6599-
Present valueUSD 11.9bnUSD 10.0bnUSD 8.4bnUSD 7.1bnUSD 6.0bn-15.8%
Present Value Of The ForecastUSD 43.4bn

Discount Rate

Source shown per component. All overridable above.

Risk-free rate4.93%Australian Government 10-year (RBA F2)
Equity risk premium6.00%Market assumption
Beta0.842As reported
Cost of equity9.98%Risk-free + beta x equity risk premium
Cost of debt8.29%Interest expense / average total debt
Market capitalisationUSD 307.5bn92.6% of capital
Total debtUSD 24.5bn7.4% of capital, book value as a proxy
Tax rate30.0%Effective, capped at statutory
WACC9.68%E/V x Re + D/V x Rd x (1 - t)

Terminal Value

Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

Perpetuity growth at 2.50%

Value per shareUSD 23.84

68% of EV

Forecast FCFF, final year
USD 9.0bn
Capex reset to depreciation
USD 10.5bn
Less reinvestment at g/ROIC (9.4% of NOPAT)
USD -956.0m
Capitalised
USD 9.6bn
ROIC (reported)
26.7%
Terminal value, undiscounted
USD 136.7bn
Terminal value, discounted
USD 90.2bn
Enterprise value
USD 133.6bn
Less net debt
USD 12.5bn
Equity value
USD 121.2bn

Exit at 13.0x EBITDA

Value per shareUSD 36.30

78% of EV

Terminal value, undiscounted
USD 232.8bn
Terminal value, discounted
USD 153.6bn
Enterprise value
USD 197.0bn
Less net debt
USD 12.5bn
Equity value
USD 184.5bn

Spread between methods: 41%.

Sensitivity

Value per share (USD) by discount rate and long-run growth.

Long-run growth
Discount rate1.50%2.00%2.50%3.00%3.50%
7.68%29.5131.1833.1735.5838.56
8.68%25.3126.4427.7529.2931.12
9.68%22.1322.9323.8424.8826.08
10.68%19.6420.2320.8821.6122.44
11.68%17.6418.0818.5619.0919.68

Outlined: this model. Green text: above today's price of 42.52. Shading: distance from this model's own value.

Priced In

Each input solved to today's price, holding the others. Alternatives, not a set.

InputModelImpliedGap
Revenue growth, every year-7.7%5.8%+13.5pp
EBIT margin42.4%72.0%+29.6pp
Discount rate9.7%6.5%-3.1pp

Yahoo Finance and RBA data. General information, not advice. Methodology.