RI.PA (Pernod Ricard SA) — Execution Log

Position Summary

Pre-Buy Red Flag Check (2026-03-06)

Fresh data was pulled on the day of purchase. Price had dropped 15.5% from the original thesis price of EUR 86.84 in just 10 days, driven by weak H1 FY26 results and broad market risk-off (VIX 25.4).

GREEN (thesis intact)

• Insider buying: CEO Alexandre Ricard + Ricard family (28.7% ownership) still buying. 6 insider purchases totaling ~EUR 6.43M in recent 90 days. Zero insider selling from founding family. The family bought at EUR 87-89 and is now sitting on a ~15% loss — and not selling. Per [shr-002], this is the strongest bullish signal.
• Dividend: EUR 4.70/share maintained. Interim dividend (Nov 2025, EUR 1.88) paid as scheduled. No cut announced.
• Leverage: Net debt/EBITDA 3.8x, down ~EUR 900M over 12 months. Below the 5.0x EXIT threshold. Management targets sub-3x by FY2029.
• Moat intact: Gross margins 59.3% — compressed but still demonstrating pricing power. EUR 8.4B of irreplaceable aged inventory (scotch, cognac, whiskey).

RED (significant concerns, why we split into tranches)

• H1 FY26 results (Feb 19, 2026): Reported net sales EUR 5,253M, -14.9% reported, -5.9% organic. Worse than many estimates.
• China deepening: -28% organic in H1 (worsened from -27% in Q1). No sequential improvement. Cognac ban shows no near-term resolution.
• US weakness: -15% organic decline. Spirits destocking continues.
• Stock below all analyst targets: At EUR 73.34, trading below even the most bearish published target (Morgan Stanley/BNP at EUR 80-85). Net analyst direction is downgrades.

AMBER (watch closely)

• Gross margin compression: 216bps contraction to 59.3%. The thesis floor is 55% — not triggered, but directionally concerning. One more half of similar compression approaches danger zone.
• EPS trajectory: H1 EPS EUR 4.04, -20% YoY. Dividend payout ratio rising to ~65-70% of declining earnings.
• Tariffs: 15% US tariff on EU spirits now in effect (~EUR 80M/yr headwind, ~7-8% of operating profit). Manageable but permanent.
• Dividend coverage: H1 FCF EUR 482M. Full-year needs EUR 800M+ to avoid the EXIT trigger. Track at FY26 results (Aug 2026).

No EXIT triggers hit

• Family not selling (strongest signal)
• Net debt/EBITDA 3.8x (below 5.0x)
• No dividend cut
• FCF still above EUR 800M on trailing basis

Entry Rationale

Pernod Ricard is the world's #2 premium spirits company at a 62% drawdown from its 2023 peak. The founding Ricard family — controlling 28.7% — is aggressively buying with their own money at EUR 87-89 and not selling despite a further 15% decline. The market prices in only 2.5% growth for a company with a 12.6% dividend CAGR over the past decade. The thesis is mean-reversion: spirits demand is structurally durable, headwinds (China ban + US destocking + tariffs) are cyclical, and you're buying a premium franchise at trough-cycle multiples alongside the most informed insiders.

Split into 2 tranches because: stock is in freefall, below all analyst targets, China is deepening not troughing, and gross margin is compressing. Want to see H2 FY26 data before committing fully.

Graham screen score 5/7. Margin of safety 39.2%. Composite qualitative score 3.4/5.

Tranche 2 Plan

Exit Plan

Profit targets (sell in thirds)

Fundamental stops (no price-based stop losses)

• EXIT: Family starts selling, net debt/EBITDA > 5x, FCF < EUR 800M two years running
• RE-SCORE: Dividend cut below EUR 4, China ban extends 3+ years, two consecutive earnings misses
• TRIM: Qualitative score below 3/5, gross margin below 55%

Time horizon

• Re-score at every H1 and FY results (~Feb and ~Aug each year)
• Exit if no progress by August 2028 (30 months)

Watchlist Alerts

• RI.PA-T2 — below EUR 70 (tranche 2 buy zone)
• RI.PA-TP1 — above EUR 110
• RI.PA-TP2 — above EUR 130
• RI.PA-TP3 — above EUR 160

Monitoring Calendar

• Q3 FY26 trading update (~Apr/May 2026) — CRITICAL: decides tranche 2. Check China trend + gross margin.
• FY26 results (~Aug 2026) — full re-score. Check FCF vs EUR 800M floor, dividend coverage.
• Insider activity: Check insiderscreener.com for RI.PA before any add. Family selling = immediate EXIT.
• US tariff developments: Monitor for escalation beyond 15%.

Related Files

• Thesis: output/graham/scores/RI_PA_thesis.md
• Plan (structured): output/graham/scores/RI_PA_plan.json
• Qualitative scores: output/graham/scores/RI_PA.json
• Research data: output/research/stocks/RI.PA/ri_pa_research.md