Pernod Ricard: Cyclical Downturn in H1 FY24; Cheap at 24x FY19 EPS

Company Update (RI FP) (Buy): Shares are still below their 2019 level. We believe the downturn is cyclical and see a 44% upside (17% annualized).

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Highlights

• Net Sales fell 7.4% and Op. Profit fell 11.6% in H1 FY24

• However, long-term growth is still solid and H1 had one-offs

• Outlook sees a stronger H2; U.S. market is already growing 1-2%

• Shares cheap at 23.9x FY19 EPS, though 3.3x Leverage is a risk

• At €155.85, we see a 44% total return (17.0% p.a.). Buy

Introduction

Pernod Ricard (“PR”) reported H1 FY24 (July-December) results last Thursday (February 15). Shares have risen by less than 1% since results, and remain below where they were at the end of 2019, before the COVID-19 pandemic:

Pernod Ricard Share Price (Last 5 Years)

Source: Google Finance (20-Feb-24).