Pernod issued a trading statement this morning upgrading its profit growth expectation for FY21 (to June). Organic underlying EBIT growth is now expected to be ‘around 16%’, up from ‘around 10%’ previously; we adjust our model accordingly and also factor in recent FX movements (these are fairly minor). We now assume 16.0% organic underlying EBIT growth and forecast adj. diluted EPS of €6.20 (previously 9.6% and €5.78, respectively) in FY21E. While the trading statement does not provide any specific regional detail, we believe the drivers of outperformance are likely to have been China and the US market. Pernod held a conference call yesterday covering the Asia Pacific region and the tone regarding China was quite positive. China sales are now back above FY19 levels with a strong performance from the more premium on-trade establishments (good for mix & margins). As young people were unable to travel home for Chinese New Year, they chose to celebrate locally in cities with their friends, which has boosted activity in bars and nightclubs. The longer-term outlook for growth in China (high single-digit to low double-digit) and India (low double-digit) was re-confirmed. The US has been a resilient market for Alcohol generally during the crisis, and Pernod is skewed more to the on-trade than its peers here. Spending at restaurants in the US jumped to above pre-crisis levels in May, according to data from the US Census Bureau, and OpenTable reported that restaurant reservations exceeded pre-crisis levels in May. Pernod is trading on nearly 25x FY23E (2-year forward) PE, which should reflect a more ‘normal’ year, when the 10-year average for its 2-year forward PE is 17.7x, and the 5-year average is 20x. Despite the better-than-expected momentum, we cannot justify turning positive at this valuation level.