The rally followed a CNBC Awaaz report stating that cigarette manufacturers have implemented sharp price hikes to offset higher excise duties, leading to higher EBIT per stick. According to the report, Godfrey Phillips India has raised the price of Marlboro Compact from ₹9.5 per stick to ₹11.5 per stick.
Brokerage firm UBS, which maintains a ‘Buy’ rating on ITC Limited, said distributor checks indicate that a range of imminent price hikes is now being rolled out across categories.
However, the brokerage cut its target price on ITC to ₹395 apiece from ₹420 earlier, implying a 21% upside from Tuesday’s closing price of ₹325.45 per share.UBS noted that 84mm cigarettes in the KSFT segment are expected to be priced at ₹24 per stick, up from ₹17 earlier. Prices of 64mm cigarettes are likely to increase to ₹7 per stick from ₹5.9 per stick. Lastly, while the pricing for the 69mm Gold Flake variant is yet to be officially announced, it is expected to be around ₹12 per stick.
The brokerage said price hikes have been fully passed on in premium cigarettes, whereas increases have been kept relatively minimal in price-sensitive 69mm and 64mm segments. This calibrated pricing strategy is likely to minimise the impact on volumes while supporting EBIT growth, UBS added.
Shares of Godfrey Phillips were trading near their intraday high levels – as of 1.55 pm. The stock has gained 6.27% in the past month.
ITC stock was trading and VST was 1.77 as of 1.55 pm.
