May add pharma, hospitals stocks as we go forward: Dhananjay Sinha
, CEO and Co-Head Institutional Equities,
Systematix Group
, says the
US tariffs
are casting a shadow on
pharmaceutical companies
. A correction has occurred in companies exposed to the US market. The outcome of the tariff investigation is expected in a couple of months. Companies may pass on tariff costs to product prices. Analysts are closely watching
Sun Pharma
, Orchid, Ajanta, and
Cipla
.
What are you making of the
SBI
numbers? What is your first read through here?
Dhananjay Sinha:
There has been pressure as far as the margin is concerned. It is kind of expected and the net interest income is also flat on a year-on-year basis. They have been able to generate operating profit by relying a lot on other income and also curtailing a certain amount of operating expenses. So, a certain optimisation is happening and also the fact that they made trading profit. That is contributing to the other income and so, that is broadly the situation. Of course, there is a positive surprise with respect to the asset quality, the provisioning, etc, which has been moved up a little bit, but generally asset quality numbers look to be okay.
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I would say that there are no negative surprises here by and large. The trend of flattening NII has been shared by other banks as well. So, the pressure on spreads has been there. RBI has cut rates and stuff. Things have to be looked at from a future perspective, but as such, on a standalone basis, the SBI numbers look to be matching the market expectation. There is no negative surprise there.
What is your reading on
Biocon numbers
?
Dhananjay Sinha
: I have not looked at the
Biocon
space. On the pharma pack, there is an overhang of the US tariffs. So, there has been a significant correction across the pharma companies that have exposure in the US market and so this is under investigation. It will take about a couple of months for the outcome to come out. So, this is somewhat exempt from the tariff hikes that have been announced in the US. So, there is a possibility that whenever the hike happens, whenever we get to know what the US wants to do eventually, we will get to know what the reaction would be.
But the broader view that we have taken is that if the tariff hike happens, companies would be able to pass on those costs to end product prices. So, we are equal weight at this juncture. We will decide on what the eventual price one would look at but if there is an adverse price reaction, we would want to buy into select names such as Sun Pharma, Orchid, Ajanta, and Cipla. These three-four names we are looking at very keenly, and not very negative at a broader level because the cyclical sectors might actually see a more adverse market reaction. But pharma, hospitals, etc, healthcare is something I would consider adding as we go forward.
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