Rub-off effect? Godfrey Phillips shares jump 6% after rival cigarette maker ITC’s Q1 earnings
Godfrey Phillips rose over 6% to Rs 2,269.90 on the NSE, putting the stock on track for its biggest single-day gain since April 29. ITC shares also climbed more than 4% to Rs 293.
ITC on Friday reported a 27% year-on-year (YoY) fall in standalone net profit at Rs 3,579 crore for the April-June quarter of FY27, as compared to Rs 4,911 crore in the year-ago period. Its revenue from operations, however, rose 28% YoY to Rs 26,943 crore during the quarter under review, from Rs 21,070 crore in the year-ago period.
ITC’s cigarette business saw a revenue surge of 81% YoY to Rs 15,384 crore. Nomura upgraded its rating on the shares of ITC to ‘Buy’ from ‘Reduce’ and raised its target price to Rs 340 from Rs 300, implying a 21% upside. The brokerage said the worst appears to be over and believes the stock now offers an attractive risk-reward profile.
Also read | ITC Q1 Results: Standalone profit falls 27% YoY to Rs 3,579 crore, but revenue grows 28%
Nomura noted that cigarette volume declined 5% year on year in the first quarter, better than its own and Street expectations of a decline of over 10%, although EBIT fell more than expected.
It expects the steps taken by the company to improve profitability to help restore EBIT per stick to pre-tax hike levels by the fourth quarter of FY27. The brokerage also believes further price hikes in Premium Deluxe and Regular cigarette segments should support pricing growth from the second quarter, while an improving product mix could offset the impact of downtrading. JM Financial also noted that the cigarette segment of ITC delivered a resilient performance amid regulatory challenges.
Motilal Oswal, however, struck a cautious tone, saying that in the cigarette business, the pass-through of the tax hike to consumers is still in progress. The sharp tax increase and competition from illicit cigarettes would take time to normalise, it said, adding that a calibrated price hike will continue to impact cigarette EBIT performance in the coming quarters.
Godfrey Phillips share price
Godfrey Phillips shares have gained over 1% in the past week and 3% in the last month, but remain down more than 2% in 2026 so far. The stock, along with other cigarette makers, came under pressure earlier this year after the government raised taxes on cigarettes and tobacco products.
Also read | Indian cigarette makers ITC, Godfrey Phillips, VST Industries see revenue and profit decline after tax hike
In February, the government increased the GST on cigarettes and tobacco products to a flat 40% and replaced the compensation cess with an additional excise duty ranging from Rs 2,100 to Rs 8,500 per 1,000 sticks, depending on cigarette length.
Over the longer term, the stock has declined 23% in the past year but delivered returns of 231% over three years and 550% over five years.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
