ITC, Godfrey Phillips surge on cigarette price hike
What's the story
Shares of cigarette manufacturers, including ITC and Godfrey Phillips India, have witnessed a major spike after reports of price hikes. The surge comes as the companies look to offset the impact of excise increases on their products. According to CNBC Awaaz, Godfrey Phillips India has hiked the price of Marlboro Compact from ₹9.5 per stick to ₹11.5 per stick. ITC's 84mm cigarettes is likely to be priced at ₹24 per stick (up from ₹17).
Price adjustments
Price hikes may marginally affect volumes
As per the report, nearly 50% of ITC's portfolio could witness a bigger-than-expected price hike. Both companies are also likely to introduce new products with significant price hikes in the 74mm category. B&K Securities said while these price hikes may marginally affect volumes, the overall profitability decline could be offset by other factors.
Market response
ITC shares rise over 2%
Following these developments, ITC's shares rose over 2% to ₹332.70 per share. Godfrey Phillips India's shares also jumped some 20% to ₹2,478.8 per share. UBS has maintained a 'Buy' call on ITC shares but reduced its target price from ₹420 apiece to ₹395 apiece. The new target price suggests an upside potential of over 29% from the stock's previous closing price.