Deutsche Bank has downgraded Rio Tinto Ltd (LSE:RIO, ASX:RIO, OTC:RTNTF) to 'hold' from 'buy', following a strong run in the shares driven by a rebound in iron ore prices.
The broker argues that, while Rio continues to deliver solidly and will soon welcome a new chief executive, much of the good news is already reflected in the share price.
Its analysts expect incoming CEO Simon Trott to focus on simplifying the business, cutting costs and possibly disposing of smaller assets.
Despite Rio’s status as Deutsche Bank’s preferred name among the iron ore majors, the bank sees growing downside risk to iron ore in the months ahead.
Valuation remains reasonable, but higher investment levels mean the shares are not as compelling as before, with the target price lowered from £53 to £51.
The downgrade comes against the backdrop of a wider sector sell-off, with Rio’s shares falling 3.5% on the day, mainly due to weaker copper prices.