RBC Capital upgrades Kingfisher to 'outperform', shares rally

(Sharecast News) - B&Q and Castorama owner Kingfisher rallied on Friday after RBC Capital Markets upgraded the stock to 'outperform' from 'sector perform' and lifted the price target to 350p from 320p. "Our store potential analysis suggests further space growth opportunities for KGF in the UK and Poland, with likely further strong trade and ecom growth," it said. "We are positive on its gross margin outlook, while Poland recovery should offset a tough French market. 12x CY26e price-to-earnings looks undemanding given KGF's strong EPS growth and cash returns."

The bank said that in collaboration with its data science team, RBC Elements, it has undertaken a store potential analysis for each of Kingfisher's three key markets - the UK, France and Poland - using geospatial and demographics analytics.

"This suggests there is still a significant white space opportunity for KGF, particularly for infill locations in the UK and Poland, while in France we expect Kingfisher to focus on restructuring the store network, improving operating efficiency and growing online sales.

"Including adjacent categories KGF believes its total addressable market is £160bn, compared to its sales of circa £13bn. Every 1pp addition to our long-term sales CAGR of +1.5% would add circa 25p to our DCF value of 340p."

RBC also pointed out that Kingfisher has a dominant position in UK home improvement.

The bank said it will face tough comps in 2026 from Q1 seasonal strength and Homebase share gains, but it expects the core DIY to be resilient, given that it's a way for consumers to save money.

"KGF should benefit from increased Trade penetration and its improving e-commerce offer, with B&Q's marketplace providing customers with a much wider range, plus the convenience of click and collect," it said.

RBC said its price target increase was due to higher long-term profit assumptions and a recent re-rating of peers.

"KGF trades at 12x CY26E P/E, in the middle of its historical range and should offer low double-digit EPS growth and a 4% dividend yield," it said.

At 0900 BST, the shares were up 1.9% at 317p.