BHP gains as Morgan Stanley upgrades stock to 'overweight'
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The news: BHP shares lifted at the start of trading on the ASX after Morgan Stanley upgraded the mining heavyweight due to lowering growth and capital expenditure risks and returning copper demand.
The numbers: Morgan Stanley analysts upgraded BHP to 'overweight' after over two years at 'equal-weight'.
They noted that risks around growth and capital expenditure were now "well appreciated", with a resolution in relation to the 2015 collapse of BHP's part-owned Fundao Dam in Brazil now "likely".
It also raised its price target 6% to $47.50, with it base case rising due to higher long-term prices across copper, iron ore and metallurgical coal.
In particular, Morgan Stanley flagged that BHP is a "key beneficiary" to "price-elastic demand" returning to copper, with around 43% of the miner's revenue coming from copper exposure.
BHP shares rose 1.6% to $39.80 by 11am AEST, having lowered more than 20% since the start of the year.
The context: Morgan Stanley analysts said they continue to prefer ASX rival Rio Tinto over BHP for its "better growth prospects".
However, Mineral Resources remained their "key" overweight option in the sector, with business transformation likely to de-lever the balance sheet from the 2025 calendar year.
The source: Morgan Stanley research
