This BSE 500 cigarette stock has zoomed 44% in 2 days in a weak market

Shares of Godfrey Phillips hit two-month high of Rs 7,170, surging 20 per cent on the BSE in Monday's intra-day trade, extending its Friday's rally after healthy Q3 results.

Godfrey Phillips shares hit a two-month high of Rs 7,170, surging 20 per cent on the BSE in Monday’s intra-day trade, and extended their rally on Friday after the company reported a 48.7 per cent year-on-year (YoY) jump in net profit at Rs 315.9 crore in the December 2024 quarter (Q3FY25). The cigarettes and tobacco products company had posted a net profit of Rs 212.40 crore in Q3FY24.

 

The company’s net revenue surged 27.3 per cent YoY to Rs 1,591.2 crore in Q3FY25, as against Rs 1,249.6 crore in the same quarter a year ago. Earnings before interest, tax, depreciation and amortisation (Ebitda) climbed 57.6 per cent YoY to Rs 358.8 crore, while margin expanded 160 basis points (bps) 9.1 per cent from 7.5 per cent a year ago.

 

In the past two days, the stock has zoomed 44 per cent. Since January 28, 2025, it has rallied 74 per cent.  The stock had hit a 52-week high of Rs 8,480 on September 16, 2024.

 

At 11:26 am, Godfrey Phillips share was quoting 17 per cent higher at Rs 7,001.80, as compared to 0.40 per cent decline in the BSE Sensex.

 

The company’s cigarette brands include Four Square, Red & White, Cavanders, Stellar, Focus, and Originals International, among others. Godfrey Phillips also manufactures and distributes the global cigarette brand, Marlboro, in India under an arrangement with Philip Morris. Along with a strong cigarette and tobacco portfolio, it also has a strong confectionery portfolio with Funda and has unique offerings for the international markets.

 

Meanwhile, Godfrey Phillips has delivered robust domestic cigarette volume growth in 9 months FY25 (April to December). The company’s topline is supported by unmanufactured tobacco exports of Rs 1,411 crore in 9MFY25, which continues to show an upward trend.

 

Governmental regulations, particularly through taxation policies, exert a significant influence on the tobacco industry. While higher taxes aim to reduce consumption, promote public health, and generate revenue, they can inadvertently stimulate illicit trade. To support the legal cigarette market, the government has implemented measures, including enforcement actions against illegal trade. Continued collaboration between industry stakeholders and law enforcement agencies remains essential to mitigating these challenges and maintaining a sustainable regulatory environment, Godfrey Phillips said in its FY24 annual report.

 

The domestic cigarette industry in the past was affected by a sustained rise in taxes and the regulatory regime, along with a sharp rise in illegal trade in the past few years, especially at the premium end, which continues to pose significant challenges to the legal cigarette industry.  However, in recent times, the government has undertaken stringent actions to curb illicit cigarette sales. This, along with lower price hikes in the cigarette portfolio, will help cigarette companies post better volume growth, according to Mirae Asset Sharekhan.