Davide Campari-Milano has had its rating lowered but its target price raised.

Dresdner Kleinwort Wasserstein has shifted its coverage of the Italian wine and spirits group to 'hold' from 'buy,' while upping its price target to EUR7.15. The target increase reflects a re-rating of the drinks sector.

The broker said in a note today (8 March) that it is expecting a strong recovery in the company's flagship Campari brand and a positive performance in Europe led by strong growth in Germany.

DKW added that it continued to believe in Campari's business model of achieving good organic growth as well as external growth from acquisitions.

At the end of last year, Campari bought Glen Grant from Pernod Ricard for EUR115m (US$137m) and Old Smuggler and Braemar Scotch brands for EUR15m. Pernod was asked to sell the brands by the European Commission following its takeover of Allied Domecq.

DKW also said that Campari has an excellent track record in turning around acquired brands, adding that it believes in the management's ability to extract good growth in the niche areas that the company operates in.

Campari is due to issue full-year results on 22 March. For the first nine months of 2005, sales were up 3.3% on the year, reaching EUR543.3m. Trading profit for the period was up by 3.1% to EUR158.6m, while EBITDA increased by 5.8% to EUR135.9m.