Rio Tinto Shares Raised by Berenberg Despite YTD Decline

Investment bank Berenberg upgraded Rio Tinto (LON: RIO), the mining giant, to Buy from Hold in a research note this week, with the company’s shares down around 9.5% this year.

The firm set a price target of 6,200p for Rio Tinto’s shares, up from 5,600p previously.

Berenberg analysts said Rio Tinto has a “lower medium-term capital bill than BHP and significantly less execution risk than Anglo American.” According to the firm, this positions Rio Tinto as the “medium-term diversified winner” among its peers.

The firm believes that Rio Tinto has an “economic moat,” a competitive advantage that protects the company from competition and allows it to maintain high profitability over a long period.

Despite the upgrade, Rio Tinto shares are down almost 1% in Thursday’s session after a 1.4% rise on Wednesday. The stock, which has been ranging for the last few years, is up around 5.8% in the last 12 months despite its year-to-date decline.

Back in June, when Berenberg downgraded Rio Tinto to Hold, it cited a lack of meaningful stimulus from China as a key reason for the move. However, China’s central bank recently issued a series of policy stimulus initiatives, which many believe may boost the demand for many commodities.

Also in June, analysts at HSBC upgraded Rio Tinto to Buy from Hold with a price target of 5,750p, up from 5,550p, noting that Rio is increasing volumes ahead of the sector, which they said would enhance the company’s cash flow and potentially dividends in the future.