- It's time to buy Rio Tinto (RIO +1.6%) after shares have dropped 8% in the past week thanks to falling iron ore prices, Societe Generale analysts say as it sees potential gains of more than 30%.
- The recent fall in iron ore prices, even if not reversed, should result in downward revision to near term consensus earnings forecasts but should not put meaningful downside pressure on longer term earnings forecasts for RIO, the firm says.
- RIO shares are trading on an implicit 2015 estimated P/E of 9.4x, well below BHP Billiton's (BHP) 13.8x, Antofagasta's (ANFGY) 18.9x, and Vedanta Resources' (VDNRF) 90.3x; the firm recommends investors buy RIO shares and hedge the risk by selling more steeply priced base metals producers.
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