First half results were strong, although Morgans notes margin pressure is starting to build. Legacy contracts disappointed as they held down realised alumina prices. The broker notes a lack of diversification and low growth competes with high margins and low gearing.
The company is yet to feel the need to add new growth to its portfolio. Rio Tinto has also flagged distribution of net proceeds from recent divestments to shareholders. Hold rating maintained. Target is reduced to $80.67 from $84.42.
Target price is $80.67.Current Price is $79.47. Difference: $1.20 – (brackets indicate current price is over target). If RIO meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges – negative figures indicate an expected loss).