BHP Group Ltd reduces staff by 750 and suspends operation of mines. Morgan Stanley maintains a "hold" rating, stating that cost optimization does not harm long-term prospects.

Morgan Stanley's in-depth analysis of BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs (BHP.US) shows that the Australian mining giant is adjusting its strategies to address industry challenges, while demonstrating strong financial performance and long-term value potential. As one of the world's largest mineral resource companies, BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs recently attracted market attention with operational adjustments in Queensland, where its alliance with Mitsubishi (BMA) announced the suspension of operations at the Saraji South mine and the layoffs of 750 employees starting in November. This move directly responds to the high coal royalty fees from the Queensland government and market pressures, aiming to maintain competitiveness through cost reductions. From a financial perspective, Morgan Stanley has given BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs a "hold" rating with a target price of 46.50 Australian dollars, with a current market value range of approximately 137.8 billion to 172.6 billion US dollars. Forecasts for the fiscal year 2025 show that the company's net income will reach 51.262 billion US dollars, EBITDA at 25.978 billion US dollars, net profit at 10.157 billion US dollars, and earnings per share at 2.00 US dollars. The future financial performance shows volatility but resilient characteristics: for the fiscal year 2026, net profit is expected to slightly increase to 10.449 billion US dollars, with EPS rising to 2.05 US dollars; in 2027, due to the impact of cost structure optimization, net profit will decline to 9.851 billion US dollars, but it is expected to rebound to 10.293 billion US dollars in 2028, with EPS reaching 2.02 US dollars. Key financial ratios such as P/E ratio are maintained within the range of 12.1-14.0, EV/EBITDA at 6.1-7.2, and return on equity at a high level of 18.4%-22.7%. From a business strategy perspective, BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs exhibits production flexibility. BMA's production guidance range for the fiscal year 2026 is between 36 million and 40 million tons, and the impact of the shutdown at Saraji South can be partially offset through cross-regional capacity reallocation. Despite the company having to pay an additional 30 million Australian dollars to around 1,100 workers due to a failed "equal pay for equal work" ruling last week, analysts believe that the layoffs will effectively offset mid-term production cost pressures. Market outlook-wise, the shutdown of the Saraji South mine has a controlled impact on overall production guidance, as it accounts for a limited percentage within the integrated complex. In terms of industry environment, the coal royalty fee policy in Queensland and market fluctuations present dual challenges, prompting the company to accelerate cost structure optimization. Risk assessment indicates that upside risks include unexpected strengthening of commodity prices, Australian dollar depreciation, and higher-than-expected steel consumption in China; while downside risks focus on project execution issues (such as the Escondida copper mine, Olympic Dam copper-uranium mine, and Jansen potash project) and operational challenges in the iron ore business. The valuation method uses 60% base scenario + 20% optimistic/pessimistic scenario of the DCF sector aggregation method, with WACC at 8.1% (beta coefficient of 0.9, debt cost at 5.5%, equity cost at 10%), ensuring that the assessment system covers multiple variables. Morgan Stanley analyst Rahul Anand emphasizes that while cost-cutting measures come with social costs, they are necessary to address policy and market pressures, and help maintain production guidance and competitiveness; research assistant Michael A. Stancliff also supports this view, believing that layoffs and mine adjustments will have positive mid-term effects.