HSBC upgrades Rio Tinto stock, highlights future cash flow prospects By Investing.com

On Tuesday, HSBC adjusted its stance on Rio Tinto Plc. (NYSE::LN) (NYSE: RIO), shifting the mining giant’s stock from a Hold to a Buy rating. The financial institution also increased the price target for Rio Tinto from AUD55.50 to AUD57.50. The new target reflects a 17% potential upside from the previous target, based on HSBC’s latest analysis.

The upgrade comes after HSBC’s review of Rio Tinto’s second-quarter 2024 operational performance and recent commodity price trends. According to the firm, Rio Tinto has shown a capacity to grow volumes more rapidly than its peers, particularly with developments at its Oyu Tolgoi and Simandou projects expected to contribute over the next three years.

HSBC believes that Rio Tinto’s volume growth will likely lead to enhanced cash flow and possibly higher dividends in the future, benefits that the market has not fully accounted for.

The company’s financial position is also noted as being the least leveraged among the major miners, providing it with the flexibility to pursue additional capital investments or mergers and acquisitions.

The analyst’s commentary highlighted the potential for Rio Tinto’s strategic moves to pay off in the medium term, stating that the company’s growth in volumes is a significant factor in the upgraded rating. The firm also anticipates that the less leveraged balance sheet of Rio Tinto positions it advantageously for future growth initiatives.

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