---
endpoint: analytics
pattern: Materials
status: done
latency_ms: 226567
conversation_id: 35c7b3ed-a371-4376-ab01-9906eed158a7
citations: 0
created: 2026-05-31 18:47:39Z
---

# Is CLSA incrementally more positive/negative on Rio Tinto. If so, why?

## CLSA on Rio Tinto: Incrementally MIXED — More positive on relative thesis, less positive on absolute valuation

**Short answer**: CLSA's headline rating on RIO (RIO AU) has been **unchanged at O-PF (Outperform)** across every note from October 2024 through June 2025. But the underlying signals diverge:

- **Target price** has stepped **DOWN** ~7% over 6 months (A$135 → A$130 → A$125) — *incrementally more cautious on absolute upside*.
- **Relative conviction vs. peers** (BHP HLD/O-PF, FMG HLD) has **STRENGTHENED**, with the aluminium / bauxite thesis becoming the sharpest part of the bull case — *incrementally more positive on relative preference*.
- **Most recent note (26 June 2025)** is a **reinforcing positive** standalone bauxite/aluminium note that explicitly re-anchors RIO as the analyst's top pick.

So the right way to characterise CLSA's stance: **less positive on near-term valuation (TP cut), but more positive on the structural thesis** — the bull case is shrinking around aluminium and copper while iron ore is increasingly priced as a drag.

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### 1. Rating & Target Price trajectory

| Date | Note | Rating | TP (A$) | Implied upside | Change |
|---|---|---|---|---|---|
| 25 Oct 2024 | Australia Resources — "Continue to prefer RIO over BHP" | O-PF | **135.0** | +14.6% | — [8] |
| 04 Dec 2024 | "More capex, output lower in 2025" (investor seminar) | O-PF | **135.0** | +12% | unchanged [7] |
| 14 Jan 2025 | "Ally preferred in '25; RIO our pick" | O-PF | **130.0** | +9% | cut from 135 |
| 19–20 Feb 2025 | "Copper growth remains the focus" (CY24 result) | O-PF | **130.0** | +7% | raised from 128 [4] |
| 15–16 Apr 2025 | "Transitional margin weakness" (1Q25 result) | O-PF | **125.0** | +12% | **cut from 130** [2][3] |
| 07 May 2025 | "Buy gold producers, Rio Tinto & BHP" | O-PF | **125.0** | +7.8% | unchanged [9] |
| 26 Jun 2025 | "Bumpering bauxite" (sector colour note) | O-PF | (no update) | — | thesis reinforced [1] |

**Net TP move Oct'24 → present: −A$10 / −7.4%.** Each cut was driven by a specific negative: replacement capex stepping up ~US$1bn (Dec'24), Pilbara cost inflation (Feb'25), and a 1Q25 iron ore shipment/production miss (~4–5% below consensus) on Pilbara cyclones (Apr'25) [10].

---

### 2. Why CLSA is **incrementally MORE positive** on the qualitative thesis

CLSA's bull case has been *narrowing and sharpening* around three pillars — aluminium, copper, and balance sheet — and weakening on iron ore:

**(a) Aluminium has become THE differentiator**
- January note: "We prefer RIO (O-PF) over BHP (HLD), given the former's leverage to a tightening Ally market" [11].
- Quantitatively: Ally accounts for **~30% of CLSA's base case RIO DCF (A$137.16/sh)** and Ally + Cu combined **~50% of valuation**; Ally to rise to **23% of group EBITDA by CY28** (vs 18% in CY25) [6].
- The 26 June 2025 "Bumpering bauxite" note explicitly states: *"Our Rio Tinto coverage sets out aluminium as a key differentiator for its portfolio and drives our preference for the stock vs its peers. We see a positive outlook for the ally supply chain (incl bauxite). Ally visible inventories are at multi-year lows… China's tightening bauxite supply, recently compounded by disruptions from key exporter — Guinea. Further, China stimulus expected to be announced in July is a tailwind for consumer-led ally demand"* [1].
- This is **fresh, post-Liberation-Day positive evidence** — adding catalysts (Guinea disruption, July stimulus) on top of the existing tightness thesis.

**(b) Copper growth still on track**
- Oyu Tolgoi copper production guided to grow >50% in 2025, and the Feb'25 note flags "copper growth remains a key bright spot for RIO… led by the continued ramp-up of Oyu Tolgoi" [5].

**(c) Balance sheet superiority vs. BHP**
- Feb'25: RIO's CY24 dividend payout was c.64% vs BHP at 50% (bottom of policy); CLSA cited this as "a key differentiator vs BHP (which guided it will likely reach the top end of its net debt target by end of FY25)" [5].

---

### 3. Why CLSA is **incrementally LESS positive** in absolute terms

The TP cuts trace a deteriorating iron ore set-up:

- **Higher 2025 capex** (Dec'24): replacement capex jumped ~US$1bn (~40% step-up), which CLSA flagged as *"a negative for the valuation"* [7].
- **Pilbara cost inflation** (Feb'25): CY25 unit costs guided ~6% above VA consensus at midpoint.
- **1Q25 production miss** (Apr'25): iron ore shipments/production missed market expectations by 4–5% on Pilbara cyclones, CY25 shipments guided to lower-end of range; SP10 (low-grade) levels hit 29% — highest in five years, posing realised-price risk [2][3].
- **TP composition** (Apr'25): SOTP DCF A$135 (50% weight) + EBITDA-multiple A$114 (50% weight) → A$125 blended — the lower multiple-based number is what's anchoring the TP cut [12].

---

### 4. Read-through: the direction-of-travel

| Dimension | Incremental direction | Magnitude |
|---|---|---|
| Headline rating | Flat | O-PF unchanged 9 months |
| Target price | **More negative** | −7.4% (A$135 → A$125) |
| Relative preference vs BHP/FMG | **More positive** | Conviction sharpening — June'25 note explicitly re-asserts RIO is "our pick" |
| Bull-case driver (aluminium/copper) | **More positive** | New bauxite tightness + July China stimulus catalysts added in June |
| Bear-case driver (iron ore) | More negative | Weather miss, SP10 discount widening, Pilbara cost inflation |

The cleanest framing: **CLSA is incrementally MORE positive on the relative trade (long RIO vs BHP/FMG) and on the aluminium/copper structural thesis, but incrementally LESS positive on the absolute valuation** — because the iron ore piece keeps chipping at the EBITDA-multiple anchor in their TP.

---

**Caveat on corpus recency**: CLSA RMS coverage in this workspace runs through **30 June 2025** (latest CLSA doc in the matched set). Anything after that date (post-2Q25 production result, any FY25 result update) is not in scope for this answer.

---

**Sources**
[1] *Australia Snoopin' Around — Bumpering bauxite* — CLSA (26 Jun 2025) — 607962857LinqAlpha.PDF
[2] *Rio Tinto - O-PF (Transitional margin weakness)* — CLSA (16 Apr 2025) — 607956082LinqAlpha.PDF (rating maintained at O-PF, TP unchanged at A$125)
[3] *Rio Tinto - O-PF (Transitional margin weakness)* — CLSA (16 Apr 2025) — 607956082LinqAlpha.PDF ("Maintain O-PF, TP unchanged at A$125/sh")
[4] *Rio Tinto - O-PF (Copper growth remains the focus)* — CLSA (20 Feb 2025) — 607951163LinqAlpha.PDF ("Maintain O-PF rating, TP to A$130.00/sh from A$128.00")
[5] *Rio Tinto - O-PF (Copper growth remains the focus)* — CLSA (20 Feb 2025) — 607951163LinqAlpha.PDF (balance sheet differentiation thesis)
[6] *Rio Tinto - O-PF (Ally preferred in '25; RIO our pick.)* — CLSA (14 Jan 2025) — 607948129LinqAlpha.PDF (Ally ~30% of DCF, Ally+Cu ~50% of valuation)
[7] *Rio Tinto - O-PF (More capex, output lower in 2025)* — CLSA (04 Dec 2024) — 607946087LinqAlpha.PDF (A$135 TP baseline)
[8] *Australia resources (Continue to prefer RIO over BHP)* — CLSA (25 Oct 2024) — 607941980LinqAlpha.PDF (Oct'24 baseline TP A$135)
[9] *Global metals & mining (Buy gold producers, Rio Tinto & BHP)* — CLSA (07 May 2025) — 607958391LinqAlpha.PDF (TP A$125 confirmed)
[10] *Global metals & mining (Buy gold producers, Rio Tinto & BHP)* — CLSA (07 May 2025) — 607958391LinqAlpha.PDF (May'25 thesis: gold producers + RIO/BHP to outperform)
[11] *Rio Tinto - O-PF (Ally preferred in '25; RIO our pick.)* — CLSA (14 Jan 2025) — 607948129LinqAlpha.PDF ("We continue to prefer RIO (O-PF) over BHP (HLD), given the former's leverage to a tightening Ally market")
[12] *Rio Tinto - O-PF (Transitional margin weakness)* — CLSA (16 Apr 2025) — 607956082LinqAlpha.PDF (CY25 EPS modestly reduced, CY26-27 unchanged)

