BHP Group Ltd (BHP.AX): Risk Reward Update

We have updated our model for 1QFY27 production results, with minor adjustments across assets leading to a 0.4% decrease in FY27e EPS and increases of 1.6%/1.4% in FY28e-29e EPS. Our base-case valuation falls 55cps to A$60.60/sh, while bull-case and bear-case valuations decrease A$1.5/sh and A$1.3/sh to A$101.95/sh and A$42.20/sh. Our price target falls 1.4% to A$68.00/sh (from A$69.00). We remain Overweight with an Attractive industry view: BHP has a relatively attractive commodity mix (iron ore, copper, met coal) supporting resilient FCF and shareholder returns, a low-cost asset position, and a strong balance sheet. Valuation is a DCF-based sum-of-the-parts weighted 60% base, 25% bull, 15% bear, using an 8.1% WACC. Upside risks include stronger commodity prices, AUD depreciation, stronger China steel consumption and project execution; downside risks include operating challenges in iron ore.