CTC posted a PAT of LKR 6.8bn an increase of ~13% YoY for 1Q 2024. The growth was aided by a 11% increase in net revenue to LKR 14.2bn. Gross revenue declined 2.3% YoY to LKR 45.8bn, due to contraction in volumes impacted by successive price hikes in January, June and December 2023. Government levies contracted to 69% from 73% of gross revenue aiding net revenue growth. GP margins contracted 1% to 91.5% led by inflationary pressures while EBIT margin grew 4% to 80% aided by prudent cost optimization measures taken during the period. CTC’s portfolio interventions has attracted consumers towards the various sub groups in John Player Gold (JPG), while premium brand Dunhill continues to gain traction. However, we believe, the disparity in prices between beedi, illegal cigarettes and CTC prices will continue to impact volumes for the remainder of2024E led by periodical price hikes impacting affordability. Although we believe the increase in prices will partially compensate the volume drop, steeper dips will have an impact on valuations. Recommending hold.