Godfrey Phillips India shares rocket 31% in just 3 sessions! Here’s what’s fuelling the rally

Godfrey Phillips India has experienced a remarkable 31% increase in its share price over the past three sessions, with the stock reaching Rs 2,635 on the Bombay Stock Exchange (BSE). This surge is attributed to recent price hikes implemented by cigarette manufacturers, aimed at offsetting rising costs due to an excise duty increase. Godfrey Phillips has raised the price of its Marlboro Compact cigarettes from Rs 9.5 to Rs 11.5 per stick. Reports suggest that rival ITC may follow suit with price increases of 20-40% across its brands, as fresh shipments are expected to hit the market soon. These developments come after the government restructured excise duties and introduced a new tobacco tax regime, significantly raising the tax burden on cigarette sales, which has raised concerns about demand and potential illicit trade. However, the recent price adjustments have mitigated some expected declines in earnings before interest and taxes (EBIT), reducing estimates from 8-15% to around 2%. Despite this rally, Godfrey Phillips shares remain down over 10% since the beginning of the year, while competitors like ITC and VST Industries have shown mixed performance. Investors are keenly monitoring the evolving regulatory landscape as the government prepares for future adjustments to tobacco taxation.