Sameer Baisiwala, India Pharma & Property Analyst at Morgan Stanley believes 2018 is going to be a year of reset for the pharma sector where profits and expectations are going to get reset. So, one needs to have a bottoms-up approach while investing in the space.
He believes, “The pharma sector is going through broader pressure points. The overriding factor is the endocentric issue specific to each companies related to FDA plan issues, where their cost structures are moving in terms of R&D – so it is aggregation of factors.”
Sharing his rationale for being upbeat on the overall healthcare space including hospitals, he says for the past 2-3 years the hospital space hasn't done well compared to the 12 years preceding that mainly because they have been intensely focused on capex (adding bed capacities etc).
However, now they are at the end of the capex cycle, over the next two-three years we will see reversal of this trend -- where operating parameters will improve, efficiencies will kick-in, occupancies will go up and balance sheets will improve. The only risk-factor being government putting price control on the implants, says Baisiwala from the sidelines of the Morgan Stanley Conference.
Talking on the impact of price control on some heart stents on the pharma sector, Baisiwala said cardiac services generally amount to only 10-15 percent of the overall hospital services revenues.
When asked about the impact of RERA on real estate companies, he said to begin with would cause lot of implementation challenges. For example there are hundreds of property developers in Mumbai and few thousand projects. The regulatory authority will have to take everyone on board and then do the implementation of the rules.
For the entire discussion, watch video
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