Fast Take Davide Campari-Milano NV

Research evidence excerpt

Fast Take Davide Campari-Milano NV

Forecast returns

Forecast price appreciation 4.0%

Forecast dividend yield 1.9%

Forecast stock return 5.9%

Market return assumption 7.9%

Forecast excess return -2.0%

Company Description

Campari is the world's sixth-largest premium spirits player with 50-plus premium and super-

premium brands sold in over 190 markets. It operates under a 'House of Brands' model that

includes a House of Aperitifs (43% of sales), House of Whiskey & Rum (14%), House of Agave

(10%) and House of Cognac & Champagne (8%), with the rest of the portfolio being local

brands (25%). EMEA represents c48% of net sales, followed by the Americas (c45%) and

APAC (c7%). Campari is listed on the Italian stock exchange and the Garavoglia family owns

51.8% of the company via Lagfin S.C.A. with c82% voting rights; c46% is free float.

Valuation Method and Risk Statement

We set our Campari price target based on a 19x EV/NOPAT, in line with premium to large-cap

spirits, a re-rating from current levels given the growth gap.

Risks include: 1) a deeper-than-expected Spirits industry slowdown, which leads to a

slowdown in Campari's growth profile; 2) increased competition in the Aperitifs segment

from other categories, which impacts the growth momentum on Aperol; 3) another spike up

in commodity costs, which the company is unable to price through, resulting in margin

headwinds; 4) a high valuation on a large acquisition, on which the company is unable to

cover its cost of capital.

Campari is dependent upon beverage market competition, regulatory restrictions, and

advertising/promotions expenses. Consumer expenditure levels, notably in Italy but also in

Brazil, Germany, Switzerland and the US, and the general economic environment in these

countries could affect the group earnings.