Cigarette Stocks Light Up As VST Rally Boosts Godfrey Phillips and ITC

Mumbai, April 17: Shares of cigarette makers rallied sharply on Friday, led by a strong surge in VST Industries, which jumped as much as 17 per cent after posting a stellar set of March quarter results, sparking a broader rally across the sector.

VST Industries which opened at Rs 274.00 now trades at Rs 267.80, up around 11%.

Results Boost

The trigger for the rally was VST Industries’ robust earnings performance. The company reported a sharp 120 per cent year-on-year jump in net profit to ₹116.7 crore for the March quarter, significantly exceeding expectations.

VST Industries share price in last one month. Source: NSE

Revenue also grew strongly, rising over 30 per cent on-year, while operating performance improved materially, with EBITDA margins expanding sharply to over 45 per cent.

The strong showing was driven by healthy growth in its core cigarette business, supported by better volumes and improved execution.

Spillover Rally

The upbeat results triggered a ripple effect across the cigarette pack, lifting shares of ITC Limited and Godfrey Phillips India. ITC rose as much as two per cent while Godfrey Phillips spurted over six per cent before paring gains, with investors betting that the strong demand trends and margin expansion seen in VST could be indicative of broader sector strength.

ITC which opened at Rs 303.85 now trades at Rs 306.85, up around one per cent, whereas Godfrey Phillips started off at Rs 2,200 and is now priced at Rs 2,208.00, up nearly four per cent.

ITC Limited share prices in last one month.

The rally reflects how earnings momentum in one key player can quickly re-rate sentiment across peers in a tightly linked sector.

Volume Growth

A key positive underpinning the rally is improving volume traction. VST Industries reported a rise in cigarette volumes, indicating steady demand despite periodic tax hikes and regulatory pressures.

This has helped ease investor concerns around consumption slowdown, particularly in a sector that has historically been sensitive to pricing and taxation changes.

Margin Expansion

Another major driver is margin expansion. The sharp jump in EBITDA margins suggests better cost management and operating leverage, which investors view as a strong signal of earnings quality.

Higher profitability, combined with volume growth, has strengthened confidence in the sector’s ability to navigate regulatory headwinds.

Sector Re-rating

Friday’s rally also signals a potential re-rating of cigarette stocks, which have faced bouts of volatility in recent months due to tax hikes and policy uncertainty.

With companies demonstrating resilience through pricing power and steady demand, investors appear to be reassessing the sector’s earnings visibility.

Outlook Ahead

While risks from taxation and regulation remain, the latest earnings have reinforced a key narrative: cigarette companies continue to deliver strong cash flows and profitability even in a challenging environment.

In the near term, the sector’s trajectory is likely to remain closely tied to earnings momentum. For now, VST Industries has lit the match—and the rest of the pack is catching fire.

Source:

• NSE
• https://www.nseindia.com/get-quote/equity/ITC/ITC-Limited
• https://www.nseindia.com/get-quote/equity/VSTIND/VST-Industries-Limited