SynopsisMorgan Stanley initiated coverage on Hindalco Industries with an ‘Overweight’ rating and a target price of Rs 1,325, citing a favourable aluminium demand-supply outlook, strong free cash flow generation and India’s multi-year growth cycle. The brokerage believes Hindalco is well positioned for margin expansion and long-term value unlocking.ETMarkets.comHindalco shares hit fresh highs after Morgan Stanley's bullish call.Morgan Stanley initiated coverage on Hindalco Industries with an 'Overweight' rating, expecting a tighter demand-supply balance to support aluminium prices for longer, which benefits the integrated aluminium player.The international brokerage set a target price of Rs 1,325 apiece for the shares of the metals major, implying an upside potential of more than 20% from the previous closing price, as it sees the company well positioned for value unlocking, supported by strong free cash flow (FCF) generation potential over the medium term. Hindalco Industries shares jumped 5% to hit a fresh 52-week high of Rs 1,154 on NSE in the morning trading hours of Wednesday. Hindalco in a structural sweet spot"A tight medium-term demand-supply outlook should support prices, as strong sustainability-driven demand meets constrained supply growth due to China’s smelter caps and slow capacity additions elsewhere. In the near term, additional tailwinds from China’s supply discipline, Middle East disruptions, and elevated energy costs should keep prices firm, while favourable positioning on the cost curve and low ex-US inventories limit downside risks," Morgan Stanley said in its note.India is poised for a multi-year growth cycle, driving strong demand for aluminium and copper, the international brokerage said. In this background, Hindalco, as an integrated aluminium player, is well positioned to benefit through volume growth and margin expansion, supported by high metal prices, increasing captive energy sourcing and capacity additions, according to Morgan Stanley, which believes that the company’s expanding copper business provides additional diversification and earnings resilience.It highlighted that Novelis has faced near-term pressure on profitability and cash flow due to higher scrap costs, tariff headwinds, elevated capex and operational disruptions, despite resilient demand. “We expect F27 to remain a transitional year, with Oswego normalising and Bay Minette commissioning through the year. Bay Minette ramp-up represents the key medium-term catalyst, positioning the business for stronger volume growth and margin recovery from F28 onward, supported by cost efficiencies, improved scrap spreads, and progress toward its long-term EBITDA target of US$600+/t,” it added.Morgan Stanley's estimates for HindalcoHindalco shares traded at around 7.7x one-year forward EV/EBITDA (10% premium vs. long-term mean levels), with an estimated 13% EBITDA CAGR over F27–29 and a 15% F29 ROE, according to the brokerage. Strong FCF generation and deleveraging from F28 onward provide scope for meaningful equity value unlocking, it further said.“Given the high correlation with LME aluminium prices and our expectation of a “higher-for-longer” pricing environment, we see current valuation multiples as remaining supported, further underpinned by improving volume and earnings growth visibility. Overall, this supports a constructive 12–18 month outlook on the stock,” Morgan Stanley said, while citing weak global demand and a sharp rise in supply from Indonesia, which could turn the demand-supply balance unfavourable and hence aluminium prices weaken, and any substantial delay in Bay Minette commissioning as the key downside risks to its bullish estimates.Hindalco share priceHindalco shares have gained more than 6% in one week and over 8% in one month. The stock has overall gained around 29% so far in 2026.In the longer term, the shares of the metals major jumped 75% in one year, 178% in three years and 198% in five years. The company currently has a market capitalisation of more than 2.58 lakh crore.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. 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