Having anticipated downgrades, we leave our €107 TP unchanged despite the significant cut to EPS. Our TP implies nearly 22x CY20E PE, which we feel is an appropriate reflection of the longer-term growth and margin attractions of Spirits balanced against the near-term risks to consensus/sentiment. We are cautious on the recovery trajectory for Spirits. Several Consumer companies have said that the restaurant channel is well below previous levels of activity in China post the lockdown being lifted. A similar situation may well play out in other markets. Travel Retail (c. 8% of Pernod’s sales normally) could take several quarters, or possibly even years, to fully recover. Furthermore, Pernod management indicated that inventory levels were – unsurprisingly – higher than usual in the various channels and warned analysts against expecting a sharp rebound when taking questions on the analyst call. We think Q121 and Q221 will be significantly weaker than previous years’ levels. The Specialty Brands (which are essentially niche and craft) outperformed in Q3 (up mid-single digits) while the large Strategic International Brands were considerably weaker (-20%). This is mainly due to the geographic skew, with Specialty Brands less exposed to China and more exposed to markets where lockdowns happened later (Europe, N America). Assuming no change in the dividend assumptions, net debt/EBITDA should rise to 3x in both FY20E & FY21E. The buyback has been suspended and management recently raised €1.5bn of bonds at attractive rates. Non-essential cash expenditures will be reined in, but like other large Consumer companies, Pernod is expecting to extend more generous credit terms to its more vulnerable customers. The next update is not until 2nd September (FY results).