Pharma sector stocks will give a mixed bag growth: Rajesh Kothari

Rajesh Kothari, Managing Director, AlfAccurate Advisors in an interview with ET Now talks about pharma stocks.

What is your call on pharmaceutical space?

In the pharmaceutical space you would have two baskets, there are two companies one is where business growth is linked to the global business and second is where the growth is linked toward on the domestic side of the business. Now on domestic side of the business they have recruited significantly.

They have added huge employees over last four to six quarters and typically it takes about one and a half to two years to get the peak productivity out of this medical force. Therefore companies whose business models are linked to domestic business they are going to be reporting either muted or not above 15% kind of a profit growth for next two to three quarters and therefore from stock perspective also we would not see any major significant upside over next two to three quarters.

Now in the other basket where the business growth is more linked to the global business outlook like Dr. Reddy or like Ranbaxy or like to an extent Lupin I think the stock price performance will come more out of this US FDA letters, the approvals of facility and ramp up of the production.

Now remember that while you are saying that in last two-three days you have got some positives at the same time we have seen a few negatives where US FDA has given or Tamil Nadu Pollution Control Board some negative news on few of the pharma companies or plant so on and so forth.

So it is going to be a very mixed bag and one needs to be very particular, this has to be stock specific approach in pharma because otherwise returns will not be like defensive sector returns where you will get 25% earnings growth for next three years and 25% upside over next three years this is no more true in pharmaceutical sector so it is going to be very much bottom of approach on the sector as a whole.