J.P. Morgan sees 20% upside in Rio Tinto, rates stock Overweight on copper growth

March 19, 2025 06:41 AM AEDT | By Investing

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J.P. Morgan sees 20% upside in Rio Tinto, rates stock Overweight on copper growth

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Investing.com -- J.P. Morgan resumed coverage of Rio Tinto (NYSE:RIO) with an “Overweight” rating and a price target of £59.20 per share, citing roughly 20% share price upside driven by strong copper growth, attractive valuation, and resilient free cash flow.

J.P. Morgan said Rio Tinto has the highest copper volume growth among diversified miners in the EMEA region, forecasting attributable copper production to rise 32% between 2024 and 2028 to 921 kilotonnes, compared to a 11% increase for Anglo American (JO:AGLJ), 5% for Glencore (OTC:GLNCY), and an 18% decline for BHP (ASX:BHP).

“We forecast Copper EBITDA will grow ~60% across 2024-28E to ~$5.0bn,” the note said.

The brokerage highlighted that Rio Tinto is trading at a 10-20% discount to its peers, which J.P. Morgan views as “more resilient vs BHP and Anglo American (both Neutral in EMEA).”

J.P. Morgan factored in Rio Tinto’s $6.7 billion Arcadium Lithium acquisition, valuing the company’s entire lithium portfolio at $6.6 billion.

But brokerage noted that lithium will remain a small part of Rio’s near-term earnings, forecasting only ~$160 million in annual EBITDA over the next three years, with free cash flow remaining negative until 2031.

J.P. Morgan turned positive on mining equities in February 2025, particularly copper miners, forecasting a “V-shape” recovery arriving in late Q1.

European Metals&Mining equities have underperformed the market by 43% since the start of 2023, but the brokerage believes the sector is “enticingly positioned for positive absolute and relative returns in 2025.”

The firm cited stronger-than-expected Chinese economic momentum, with January-February activity data showing fixed asset investment rising 4.1% year-over-year, compared to 2.2% in December 2024.

J.P. Morgan economists raised their Q1 2025 China GDP growth forecast to 6.6% quarter-over-quarter from 5.3%, and their full-year 2025 estimate to 4.6% from 4.3%.

J.P. Morgan said Rio Tinto’s superior copper growth and valuation discount make it the top pick in the UK-listed diversified mining space.

This article first appeared in Investing.com

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