AUSTRALIA FIRST TO MARKET

Research evidence excerpt

AUSTRALIA FIRST TO MARKET

Asia Pacific Equity Research

Australia First to Market 16 July 2026

Top Stories

Rio Tinto Limited (Lyndon Fagan) (RIO AU, OW)

2Q26 results solid, volume guidance unchanged, costs positively adjusted, retain OW

Key takeaways: 1) Pilbara iron ore shipments were broadly in line with market expectations (albeit short of JPMe where we

expected a catch-up from Q1 weather), 1H realised revenue was US$1.2/wmt below JPMe. 2) All 2026 volume guidance was

unchanged, whilst copper C1 net unit cost guidance was cut by ~50% on higher gold by-product credits (prices) and

productivity. 3) ~$1.6bn cash outflow was flagged ($400m OT tax, and ~$1.2bn working capital) in the period. RIO has fallen

~14% from June highs (ASX200 flat/ BHP -6%), whilst commodity prices have remained relatively well supported. At 0.8x P/

NPV and FY27 EV/EBITDA of 5.4x, the valuation screens attractive. It is also markedly below BHP at 0.91x P/NPV / 7.5x EV/

EBITDA. On a relative basis, we are more drawn to the BHP investment proposition (larger copper share/longer-term growth),

but see RIO’s valuation as materially cheaper. Maintain OW.

| Coles Group Ltd (Bryan Raymond) (COL AU, N)

FY26 result outlook: Downgrade to Neutral as lagging on sales and earnings growth

Coles will report its FY26 result on 25 August. We expect investors to focus on: 1) sales growth differentials in 4Q26 and the

first 8 weeks of 1Q27; 2) the pace of inflation; 3) the FY27 cost outlook given elevated wage rates; 4) soft liquor performance

and potential exit of Liquorland Warehouse; and 5) the potential acquisition of Greencross. We downgrade to Neutral following

EPS downgrades (+0.8% in FY26E, -3.9% in FY27E, -4.9% in FY28E). We cut our price target by -2.5% to $23.50, broadly in

line with the share price.