Campari’s 9M Report Better Than Expected; Near-Term Remains Precarious, and Shares at a Premium

Like other distillers we cover, shares of narrow-moat Campari Group had rallied meaningfully in the last few months, setting up an interesting nine-month earnings release. The results were solid, with sales ahead and profit roughly in line with our expectations. Nevertheless, a plethora of risks remains as COVID-19 lingers across key markets, and the firm remains reliant on an increasingly tenuous on-premises recovery, especially in Italy. We plan to raise our fair value estimate to EUR 7.90 from EUR 7.40 to reflect the time value of money and slightly better profitability this year, but given the lofty current trading levels, the risk/reward proposition remains uncompelling, in our view.