Asia and Europe beat drives modest upgrade Pernod reported Q3 organic sales +19.4% (consensus +11.3%) and 9M organic sales +1.7% (consensus -0.2%). The standout region was Asia RoW (sales in Q3 +36%), but Europe (+5% in Q3) actually had the biggest beat vs. consensus, as demand for Scotch and Specialty Brands was resilient, despite restrictions. Following on from LVMH’s strong performance in calendar Q1, the beat is not altogether surprising; however it is nonetheless indicative of the strength of India (up double digits in Q3), China (+34% in Q3 on a weak prior year comp) and US (continued mid-single digit growth), as well as Europe’s resilience during calendar Q1. The read-across to Diageo is positive. Management increased the FY outlook (to June) from ‘organic sales growth in FY21’ to ‘organic growth in profit from recurring operations of c. +10%.’ Sales are expected to accelerate in Q4. To put the raised guidance into context, consensus was already expecting FY21 organic EBIT growth of +7.1%, implying an upgrade to current year forecasts of about 3%. The company hosts a conference call at 9am CET/8am UK time. Still expensive The valuation remains a challenge (c.30x CY21E PE, c.27x CY22E PE) and keeps us from turning more positive on the stock. The upgrade on the back of an excellent Q3 is not substantial enough to change our view at this point. We await further details on the call.