New Delhi: Amid reports of cigarette prices has been increased across some categories, shares of cigarette manufacturers ITC, Godfrey Phillips India and VST Industries surged up to 12 per cent on Wednesday.
Did cigarette prices hike?
According to the NDTV Profit reports, quoting analysts at B&K Securities and InCred, stated that ITC Ltd. has sharply raised cigarette prices across some categories, negating the impact of excise duty on its operating income.
Price revisions include ITC’s Gold Flake and Classic (Premium), which has been hiked by 41 per cent, Classic Connect (Slims) by 20 per cent, and Gold Flake Superstar (Value) by nearly 19 per cent, as per NDTV Profit.
What about stocks?
UBS has issued a bullish call on ITC, stating that the stock’s valuation now appears attractive after the recent correction.
ITC shares rose nearly 2 per cent to trade at Rs 330.80 apiece, while Godfrey Phillips India shares jumped more than 12 per cent to Rs 2,314.30 per share.
The price hikes are expected to limit the EBIT decline to 2 per cent from expectations of 8-15 per cent earlier.
ITC share price gained for the third day in a row, rising 1 per cent to Rs 329.95 today and 5 per cent in the three days, including today’s gain.
Meanwhile, Godfrey Phillips shares rallied over 11 per cent to Rs 2,297.70, taking its two-day gain to 14 per cent. Another cigarette manufacturer, VST Industries, rose 3 per cent in trade today.
What about price hike?
The cigarette manufacturers have sharply hiked prices to offset the impact of excise increases, resulting in an increase in EBIT per stick, according to reports.
Godfrey Phillips India has hiked the price of Marlboro Compact from Rs 9.5 per stick to Rs 11.5 per stick, the report said.
According to media estimates, nearly 50 percent of ITC’s portfolio may see a larger-than-expected price hike.
Companies are expected to launch new products with price hikes in the 74 mm category, as per the report.
As per reports, citing B&K Securities as saying that while the price hikes may slightly impact volumes, the overall profitability drop may be mitigated.
