SynopsisCiti initiated coverage on Vedanta Aluminium with a 'Buy' rating and a Rs 560 target price, identifying it as its top Indian metals pick. The brokerage cited a positive aluminium outlook, growth potential, and cost efficiencies as key drivers for its bullish stance. Despite an initial 11% drop post-listing, analysts see strong long-term potential in the aluminium business.AgenciesVedanta Aluminium Metal appears to offer the most compelling risk‑reward among the five entities for long-term investors.After dropping nearly 11% in just three days since listing, Citi initiated coverage on the shares of Vedanta Aluminium with a ‘Buy’ rating and a target price of Rs 560 apiece, naming the newly-listed stock its top Indian metals pick.The latest target price implies an upside potential of more than 20% from the stock’s previous closing price of Rs 465.36 apiece on NSE.Citi listed key drivers for its bullish call, which include a positive aluminium outlook, growth potential (Balco expansion, Vedanta Aluminium debottlenecking), cost focus (higher captive alumina, domestic bauxite and captive coal), and improving leverage. It expects the company to have a net cash position by FY28. Expecting aluminium prices to hover around $3,400 in FY27-28, Citi explained that every $100 per ton change in LME can impact the company’s EBITDA by 4-5.5%, and subsequently fair value by nearly Rs 30 per share. “We open a 90-D positive CW: Our commodities team believes the aluminium market is in deficit and will draw inventories sharply over the next 3-6 months, driving prices up 15-20% to $4,000 per ton in base case,” it added.Also Read | 4 new Vedanta Group stocks debut on Dalal Street. What's ahead?How have Vedanta Aluminium shares been performing?Four Vedanta Group companies that spun out from Vedanta after the demerger made their much-awaited market debut on Monday, following which the shares of aluminium, iron and steel as well as oil and gas tumbled while those of the power business soared in three days. Vedanta Aluminium shares listed as the only largecap stock on the list, debuting at Rs 522 apiece on NSE and surpassing its parent company in terms of market capitalisation on Monday. The stock then dropped 11% in three days to close at Rs 465.36 apiece on Wednesday. Also Read | What’s dampening the shine of Vedanta’s new crown jewel?What lies ahead for Vedanta Aluminium?From a pure valuation and structural standpoint, Sunny Agrawal, Head of Fundamental Research at SBI Securities, said that Vedanta Aluminium Metal appears to offer the most compelling risk‑reward among the five entities for long-term investors. The aluminium business has emerged as the largest and most scalable vertical within the group, benefiting from strong global demand drivers (EVs, renewables, infrastructure) and integrated cost efficiencies, which enhance margin resilience across cycles, he noted, adding that by contrast, the residual Vedanta housing the zinc-silver business (Hindustan Zinc stake + Zinc International) and base metals business offers stable cash flows and dividend yield but likely limited valuation re-rating given that much of the zinc value is already priced in.“The other demerged entities (oil & gas, power, and iron & steel) offer cyclical upside but carry higher commodity and execution risks, especially given weaker listing traction and greater earnings volatility. Hence, on a forward SOTP basis, aluminium stands out as a structural compounder with favourable operating leverage, while the rest are more tactical or cyclical plays,” Agrawal further said.Also Read | Vedanta Aluminium lists at Rs 527 on BSE after demerger. Is it the group’s new crown jewel?(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. 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