ITC, Godfrey Phillips Share Price Rallies as Cigarette Business Shows Resilience After Tax Hike

ITC share price and Godfrey Phillips share price advanced by up to 5% on August 3 after investors responded positively to brokerage assessments indicating that the impact of the recent cigarette tax increase may have reached its lowest point. The gains followed ITC’s June quarter earnings, which suggested that cigarette demand remained stronger than many had anticipated.

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ITC share price climbed as much as 4.11% to ₹292.55 during the session, marking its highest level since June 23. Godfrey Phillips share price also rose nearly 5%, tracking the positive sentiment around cigarette manufacturers. The company produces and markets Marlboro cigarettes in India under a licensing arrangement with Philip Morris International.

Volume Growth Offsets Margin Pressure

ITC, in its quarterly results announced on Friday, reported a standalone net profit of ₹3,578.8 crore, down 27.1% from ₹4,910.7 crore in the corresponding quarter last year. The decline followed the increase in cigarette excise duty announced earlier this year.

Despite the earnings pressure, brokerages noted that cigarette sales volumes remained better than expected. The performance reduced concerns that higher taxes would push consumers towards illicit cigarette products, while also indicating that demand had remained relatively stable after the duty revision.

The Centre had imposed an additional excise duty ranging from ₹2,050 to ₹8,500 per 1,000 cigarette sticks, over and above the existing 40% consumption tax. The announcement had initially raised concerns about profitability and demand across the sector.

Brokerages See Recovery Taking Shape

According to brokerage reports, ITC’s phased pricing strategy has helped cushion the immediate impact of the higher tax burden while preserving its market position. The resilience in cigarette volumes is expected to provide the company with greater flexibility to implement additional price increases over time.

Brokerage PhillipCapital stated that the June quarter could represent the low point for earnings from the cigarette business. HSBC said the recovery is likely to be gradual as successive price increases are reflected in future financial performance.

Jefferies and Nomura also observed that demand remained stronger than anticipated following the tax revision, creating room for further pricing actions. The brokerages indicated that sustained consumer demand could support profitability in the coming quarters even after absorbing the impact of the higher levy.

Cigarette Business Remains Central to Earnings

The cigarette segment continues to contribute a significant share of ITC’s overall earnings, making its performance a key factor for investors tracking the company. As a result, movements in ITC share price often reflect expectations around the profitability of this business.

Dolat Capital said FY27 is expected to remain a transition period as the company balances price increases with market share protection. The brokerage added that profitability in the cigarette business could improve by the end of the financial year if current trends continue. The latest trading session reflected improving investor confidence, with both ITC share price and Godfrey Phillips share price benefiting from expectations that the sector has begun adjusting to the revised tax regime.