ITC, Godfrey Phillips shares extend rally, surge up to 11%: What's behind the jump? Explained

Shares of cigarette manufacturers ITC, Godfrey Phillips India and VST Industries surged up to 11% on Wednesday, February 18, extending their winning run amid reports of price hikes.

Several media reports stated that these companies have raised prices to offset the impact of the excise duty increase. The price hikes are expected to limit the EBIT decline to 2% from expectations of 8-15% earlier.

ITC share price gained for the third day in a row, rising 1% to ₹329.95 today and 5% in the three days, including today's gain. Meanwhile, Godfrey Phillips shares rallied over 11% to ₹2,297.70, taking its two-day gain to 14%. Another cigarette manufacturer, VST Industries, rose 3% in trade today.

Last month, cigarette manufacturers declined 9%–26% in January after the government’s sharp increase in excise duty, announced at the beginning of 2026, raised concerns about margins and volumes.

The excise hike, effective February 1, resulted in a price increase of up to 60% in real terms. The revised duty ranges from ₹2,050 to 8,500 per 1,000 sticks, based on cigarette length, with higher taxes on longer sticks.

Price hike by cigarette makers eases margin worries

A report by NDTV Profit, quoting analysts at B&K Securities and InCred, stated that ITC has sharply raised the prices for its cigarettes across some categories to negate the impact of the excise duty hike on its operating income.

For ITC, the impact of excise duty is most pronounced in the 75-85 mm segment, which accounts for 16% of cigarette volumes. Costs in this category could rise by 22-28%, implying potential price hikes of ₹22-3 per stick to protect margins, Religare Broking had said last month.

Today, UBS, as quoted by CNBC TV-18, stated that ITC's 84 mm cigarettes (KSFT segment) have seen the steepest tax increase, resulting in the price being raised to ₹24 from ₹17 earlier. While on the other extreme, the 64 mm cigarette is expected to be priced at ₹7 per stick from ₹5.9 earlier.

While the pricing of 69 mm Goldflake is yet to be known, UBS said it expects it to be around ₹12 to be its new price (given competing Marlboro is at ₹11.5).

"It is clear that price hikes have been fully passed on in premium cigarettes, while it is kept minimal in price-sensitive segments of 69 mm and 64 mm. This pricing approach is likely to keep ITC's volume and EBIT impact to a minimum," said the brokerage as it maintained a 'Buy' rating on the counter.

From an earnings standpoint, even a low-to-mid single-digit price hike can translate into meaningful operating leverage, especially if volume decline remains contained, said Harshal Dasani, Business Head at INVasset PMS.

“Historically, the industry has demonstrated the ability to pass on cost pressures with limited elasticity impact. However, sustainability will depend on regulatory stability and the absence of sharp tax hikes in the upcoming policy cycle,” he opined.

For investors, the move signals improved near-term profitability visibility rather than a structural re-rating trigger, he said.

ITC, Godfrey Phillips shares: Technical view

Commenting on the technical outlook for ITC shares, Anshul Jain, Head of Research at Lakshmishree, said that the current rebound appears to be a technical bounce rather than a trend reversal.

"ITC share price may attempt to test the falling 50-day EMA near 341, with an extended pullback toward the 350 zone possible if momentum persists. However, daily and weekly 10, 20, and 50 EMAs remain bearishly aligned above price, indicating that the primary trend is still down," Jain cautioned.

From a risk–reward perspective, rallies into this band are likely to attract fresh selling. Therefore, he advised using them to exit long positions while the broader structure remains weak.

For Godfrey Phillips, the Lakshmishree expert said the stock is now staging a technical bounce, forming a five-week consolidation box above the 2,250 zone, indicating temporary demand absorption.

"This structure suggests a likely pullback toward the falling 20-week EMA near 2,520, which acts as the first major resistance on the higher timeframe. However, the broader trend remains weak, with daily and weekly 10, 20, and 50 EMAs still bearishly aligned above price. This configuration signals supply dominance rather than accumulation. As a result, any rallies into the moving average cluster are likely to face selling pressure, making them tactical exit or short-on-rise opportunities while the downtrend remains intact," he added.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.