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Stock price: €62.5 ($80.68 USD)

Conclusion: Trading update leads us to confirm both our estimates for F10 and our valuation range for Pernod Ricard (OTCPK:PDRDF) (€65-€67 per share). We think the stock remains fairly valued.

F10 (ended June) trading update: sales down 2% reported (up 2% organic). EBIT growth between 3% and 4% vs 3% previously estimated.

We confirm our €3.90 EPS estimate for the year (-9%)
EBIT growth will be held back by negative forex impact and changes in scope.We expect reported EBIT to retreat 2% to €1810m.
In addition EPS will be diluted by a higher number of shares.

We look for €4.51 in F11, up 15%
We think organic growth could reach 4%, compared with 2% last year and 3% in Q4. H1 will benefit from easy comps (down 3% last year). According to management, Asia and Latam remained buoyant while the US improved. Europe remains the weak spot.
Forex could add 6% partly offset by -1% impact from changes in scope.
We expect margin progression to resume despite further increase in marketing spending, helped by positive leverage and forex.

Pernod Ricard trades at 14.9x and 13.3x P/E and 12.5xEV/EBITDA based on calendar 2010 and 2011 estimates. We think Pernod Ricard looks fairly valued.

Source: Pernod Ricard: Asia and Latin America Remain Buoyant, Europe Is the Weak Spot