Berenberg upgrades Rio Tinto to 'buy'

(Sharecast News) - Analysts at Berenberg lifted their stance on Rio Tinto to 'buy' from 'hold' on Thursday and raised their target price on the stock to 8,600p from 8,100p, arguing that investors have a tactical opportunity to rotate out of BHP after its strong yeartodate run.

Berenberg said BHP's 39% year-to-date gain versus Rio's 16% reflected Australialisting dynamics and sector rotation, but on fundamentals it said Rio now looked to be the more attractive major.

The German bank highlighted Rio's stronger free cash flow yield of 7% versus BHP's 5.5% over 2026-28 and higher dividend yield of 5.4% versus 3.1%, alongside a cheaper valuation at 5.3x threeyear forward enterprise value-to-underlying earnings compared with BHP's 6.8x.

It added that Rio was exiting a heavy capex cycle just as BHP was entering one, with projects such as Oyu Tolgoi and AP60 now largely complete, with rampups set to lift Rio's copper volumes by around 19% by 2028. BHP, meanwhile, faces rising spend at Jansen, Copper South Australia and Vicu�a, with flatter nearterm volumes and greater risk of cost overruns.

Berenberg also welcomed Rio's H1 results, noting management's renewed focus on productivity and portfolio value creation, including plans to unlock $5bn to $10bn from noncore disposals.

"After a broad sector pullback, we like Rio's valuation, cashflow generation and setup versus BHP," said Berenberg, which noted the shares currently trade on 1.33x net asset value and 5.5x FY26 EBITDA.

Reporting by Iain Gilbert at Sharecast.com