Cigarette Stocks Rally as VST Industries Profit Jumps 120% In Q4

Shares of cigarette companies saw strong buying interest on Friday after VST Industries reported a sharp jump in its March quarter earnings, boosting sentiment across the sector.

VST Industries' stock surged over 14% to hit an intraday high of ₹286.78, following a robust performance in Q4 FY26. The rally also lifted peer stocks, with ITC and Godfrey Phillips India gaining around 1.5% and 4%, respectively.

The company reported a 120% year-on-year (YoY) jump in net profit to ₹116.7 crore, compared to ₹53 crore in the same period last year. Revenue rose 30.9% YoY to ₹457 crore, while EBITDA surged sharply to ₹208 crore from ₹69.5 crore a year ago.

Margins expanded significantly, with EBITDA margin rising to 45.6% from 19.9% on a yearly basis, reflecting strong operating leverage and improved product mix.

Strong Volume Growth, Margin Expansion

VST Industries also reported steady growth in its core cigarette business. Net cigarette revenue rose to ₹1,151 crore from ₹921 crore a year earlier, while cigarette segment revenue stood at ₹631 crore in Q4 FY26 compared to ₹337 crore in Q4 FY25.

Cigarette volumes remained healthy, with average monthly volumes rising to 667 million units during the quarter from 647 million units a year ago. For the full year FY26, volumes increased to 696 million units from 641 million units in FY25.

The company said margin expansion was supported by operational efficiencies and favourable product mix, even as it navigated changes in the tax structure.

With effect from February 1, 2026, the government reduced the compensation cess on cigarettes to nil while increasing GST and excise duty. The company noted that these changes make certain financial comparisons across periods less comparable.

Revenue from unmanufactured tobacco declined to ₹58 crore from ₹116 crore a year ago, partly impacted by external factors.

Sector Sentiment Improves Despite Challenges

The strong performance by VST Industries triggered a broader re-rating in cigarette stocks, with investors betting on improved profitability and demand recovery in the segment.

Managing Director of VST Industries Piyush Srivastava said the company achieved robust volume recovery in 2025, supported by a strengthened brand portfolio and disciplined execution. However, he cautioned that geopolitical instability in the Middle East continues to impact the unmanufactured tobacco business.

He also flagged that steep tax increases could pose challenges going ahead, though the company remains focused on strengthening its brands and maintaining execution efficiency.

The earnings momentum and margin expansion have reinforced confidence in the sector, even as regulatory and tax-related uncertainties continue to remain key risks.