UPDATE: Morgan Stanley Upgrades Rio Tinto plc

In a note released Wednesday morning, Morgan Stanley analyst Menno Sanderse upgraded shares of Rio Tinto plc RIO from Equal-weight to Overweight and raised the price target from 3,540p to 4,000p.

Sanderse wrote, "The reshaping of RT on its pre-supercycle principles and standards combined with rapidly rising cash flow should trigger a genuine re-rating."

Sanderse explained the company's CEO is reintroducing its pre-supercycle principles, which Sanderse believes will lead to a 34 percent to 41 percent increase in dividends by 2016.

Looking to the company's investment opportunities, Sanderse said there is room for U.S.$2 billion EBITDA improvement in aluminium.

Following the upgrade, shares of Rio Tinto are trading up ~1.6 percent in Wednesday's pre-market session.