Pros
- EBITDA margin of 41.10% vs Industry Median of 10.84%
- Net margin of 23.19% vs Industry Median of 3.42%
Cons
- Asset turnover ratio of 0.49x vs Industry Median of 0.56x
- Current ratio H1 FY2026 of 1.42x vs Industry Median of 1.62x
Shares outstanding 1627.11mn
Free float 1070.75mn
P/E (TTM) 11.04
Market cap 104486.76mn
EPS (TTM) 7.97
Tangible book value 40.24
Per share (as per last financial filings)
ROE 19.57%
Enhanced productivity and spending within budget. Realised $870mn in “productivity benefits” year to date and is on course to deliver a $1.8bn annualised productivity benefit by end 2026
Its capital release program, targeting $5-10bn, is also predicted to enhance capital allocation and support investment in higher-returning opportunities.
Valuation growth of low double digit growth as per Price to Earnings.
Major projects including Oyu Tolgoi, Simandou (approx 10 Mtda Q3 60 Mtda target H2 2028) and Lithium expansions “strengthening long-term iron ore growth prospects” according to Kalkine.
| Reporting period | Net Margin | EBITDA margin |
| H1 FY24 | 22.0 | 41.20 |
| H1 FY25 | 16.90 | 37.40 |
| H1 FY26 | 23.20 | 41.10 |
| Parameter (USD mn) | H1 26 | H1 25 | YoY change % |
| Revenue | 31,028 | 26,873 | 15.5 |
| Operating Income | 9,160 | 6,971 | 31.40 |
| Net Income | 6,664 | 4,528 | 47.20 |
Rio Tinto said in its 2025 financial report
- That despite global trends towards protectionism and higher trade barriers, as well as re-routing of traditional supply chains, that “the traditional growth drivers of metals demand increases are robust” (i.e. population growth, industrialisation and urbanisation in emerging markets), with new drivers emerging (e.g. AI data centres, robotics)
- Global electricity demand continues to grow, with an increasing proportional allocation to renewables, “supported by their improved cost competitiveness relative to hydrocarbons… The expansion of new power generation, transmission, and distribution infrastructure is a significant driver for aluminium, copper and lithium”.
However, it cited persistent supply constraints:
- Scrap. Lower demolition rates, longer life cycles and lower scrap recovery “creating additional requirements for primary supply”
- Mine delivery timelines extending as discovery rates reduce and grades deteriorate, “We see increasingly complex approval processes, higher environmental and social standards, and deeper ore bodies requiring more complex engineering”
- Cost of delivering supply growth is increasing, and existing capital allocations may need to expand to deliver on targets.
Kalkine warns in summary that “Delays, cost overruns or ramp-up challenges at key projects such as Simandou, Oyu Tolgoi and lithium expansions could affect production growth and returns”.
Commodity Breakdown (Rio Tinto)
Iron ore – Strong steel demand from the Global South should mitigate (in part or in full) for expected fall in demand from China. “Incremental iron ore supply growth is needed just to offset depletions”
Copper – Demand forecast heavily influenced on the upside by electrification. However, overhead costs and “the complexity of new primary supply” means production quotas may be insufficient at current supply forecasts.
Aluminium – Higher costs as production diversified outside China and rising electricity costs will in the long run translate into higher prices.
Lithium – Cost of electric vehicles to become more competitive vs internal combustion energy valuations with falling battery prices leading to “increasing demand for battery energy storage systems”.
Commodity Demand Forecasts (based on data available Dec 2025)
| 2025 F | 2035F | |
| Aluminium (transmission distances grow 47% in next decade) | 103 Mt | Circa 1.2x |
| Lithium (battery energy storage systems BESS to triple over next decade, Bloomberg NEF estimates) | 1.4 Mt | Circa 3.4x |
| Copper (Electrification of fixed energy demand increases from 21% to 30% to 2035, Bloomberg NEF estimates) | 34 Mt | 1.1x |
Fundamental Relative Valuation Based on Price to Earnings
EPS (FY Dec’27 USD) 8.17
EPS (FY Dec’27 GBX) 604.36
Price/EPS Multiple (NTM) (Peer avg) (Approx) 11.40x
% Premium / (Discount) 1%
Implied Price/EPS Multiple 11.51x
Target Share Price 6,958.58
Current market price 6,241
Leave a Reply