Some triggers have played out and more will emerge over the next two years as Ranbaxy transitions from an aggressive Indian MNC focused on top-line growth to a conservative Japanese company focused on profitability.

What will move the stock?
1) Expected resolution of the USFDA issue at the Dewas and Poanta Sahib facility; 2) Margin improvement in the base business; 3) Strong domestic formulations on addition of 1500 in the field force; 4) Commencement of Nexium API in Q4CY10 and formulations supplies from Jan'11; 5) Possibility of a couple of FTFs in H2CY10; 6) Greater clarity from Daiichi on the roadmap to tap the Japanese generics market; and 7) Clarity on alliances.

Where are we stacked versus consensus? Our estimates are the highest on the Street because we are optimistic about an eventual resolution of the USFDA issue at the Dewas facility in H2CY10. Moreover, we expect margins of the base business margins to improve substantially. Our 12-month target price of Rs792 is also the highest on the Street.

What will challenge our target price?
1) Ranbaxy's inability to secure USFDA clearance for the Dewas facility; and 2) Outstanding forex hedges of USD1bn over the next eight years, engendering volatility in near-term earnings.