GODFRYPHLP

Cigarette stocks rallied on August 3, with ITC and Godfrey Phillips gaining up to 5%, after brokerages said ITC's June-quarter earnings indicated that the worst impact of the recent excise duty hike on cigarettes may be behind the company. ITC shares climbed as much as 4.11% to ₹292.55, their highest level since June 23. Shares of Godfrey Phillips, which manufactures and markets Marlboro cigarettes in India under a licensing agreement with Philip Morris International, also gained nearly 5% in sympathy. ITC reported a 27% year-on-year decline in standalone net profit to ₹3,579 crore for the June quarter, reflecting the near-term impact of higher taxes and margin pressure. However, analysts highlighted stronger-than-expected cigarette volumes, easing concerns that consumers were shifting to illicit products following the tax increase. They believe the resilient demand gives ITC greater flexibility to implement further calibrated price hikes, which are expected to support profitability over the coming quarters. Earlier this year, the Centre imposed an excise duty ranging from ₹2,050 to ₹8,500 per 1,000 cigarette sticks, in addition to the existing 40% consumption tax, a move that analysts had described as a negative surprise for the industry. It is also noted that ITC's phased pricing strategy appears to be helping preserve market share despite short-term pressure on margins. As cigarettes contribute the majority of the company's earnings, a sustained recovery in the segment remains a key trigger for the stock.