Rio Tinto Limited

Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Rio Tinto Limited (ASX: RIO) is involved in the production of gold, copper, iron ore, aluminum, coal, titanium dioxide, borates, and other minerals and metals.

1.2 The Key Positives, Negatives, Investment Highlights and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~23.29% of the total shareholding. The Vanguard Group, Inc. and Vanguard Investments Australia Ltd. hold a maximum stake in the company at ~5.00% and ~4.95%, respectively.

1.4 Key Metrics:

During 1HFY22, the company recorded an operating margin of 41.0% against 52.7% in 1HFY21. In addition, it posted an asset turnover ratio of 0.29x same as the industry median. Below is captured the trend of the net margin and the cash cycle days. 

Section 2: Business Updates, Financial Highlights, and Operational Summary

2.1 Business Updates:

2.2 Insights of FY22:

2.3 Operational Summary:

The company experienced a decrease in Underlying EBITDA in 1HFY22 as compared to exceptional all time high performance of USD 21.43bn posted in 1HFY21, Iron ore segment contributes highest to Underlying EBITDA, followed by Aluminum segment in 1HFY22, as stated below:

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is August 31, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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