Rio Tinto stock climbed over 3% in London trading on Thursday after two major brokerages upgraded the miner to Buy, citing an attractive valuation, improving cash flow metrics and a strengthening copper outlook following the company’s first-half results published on July 29.
Berenberg elevated its recommendation from Hold to Buy and raised its price target to 8,600 pence from 8,100 pence. Goldman Sachs similarly moved its stance to Buy from Neutral and nudged its 12-month price target to
Goldman noted that Rio's shares had retreated about 15% from their June highs, creating what it described as an attractive entry point. Both brokerages highlighted valuation metrics that, in their view, favor Rio over peer BHP.
Berenberg pointed to Rio's stronger free cash flow yield and dividend yield across the same timeframe, while observing that Rio trades at a three-year forward average EV/EBITDA of 5.3 times versus BHP's 6.8 times. Goldman framed Rio's valuation at 0.65 times net asset value compared with peer average near 0.9 times, and about 5.7 times next-twelve-months EBITDA versus 7 times for BHP.
Analysts at Berenberg described their recommendation as a tactical rotation from BHP into Rio Tinto, noting a divergence in capital cycles. They argue that many of Rio's large-scale projects are now moving into production and producing cash, whereas BHP is entering a fresh round of capital spending on projects such as Jansen potash and Copper South Australia. Berenberg also forecast Rio's copper volumes rising roughly 19% by 2028 compared with 2026.
Goldman's commentary on the group's first-half performance emphasized that realised pricing and costs performed well, with cash flow and net debt both ahead of expectations and guidance unchanged. The bank expects further progress on Rio's cost-out programme and flagged potential catalysts from planned divestments valued at an estimated $5 billion to $10 billion, including a possible sale of Pilbara power infrastructure that Goldman values at about $3 billion to $4 billion.
Rio has increased its cost reduction target to an annualised run rate of $1.8 billion by the end of the year, up from a prior target of $650 million, and reported $1.3 billion of cost savings achieved in the first half. The company left its 2026 production and capital expenditure guidance unchanged, retaining capex of roughly $11 billion for both 2026 and 2027, while lowering its expected 2026 tax rate to about 25% from an earlier estimate of 30%.
Both brokerages cited copper as a key differentiator for Rio. Goldman projects copper-equivalent production growth of about 10% and EBITDA growth of roughly 30% between 2025 and 2030, driven by a combination of the underground ramp-up at Oyu Tolgoi, improving grades at Bingham Canyon and the development of the Simandou iron ore project in Guinea.
The upgrades from Berenberg and Goldman, coupled with Rio's maintained guidance, expanded cost-out ambitions and a pipeline of potential asset sales, underpinned investor interest in the stock during Thursday's session.
Source note: Article based strictly on details provided from the company's first-half results and subsequent broker commentary.