Goldman ups Kingfisher to 'buy', says market too sceptical on efficiency programme
B&Q and Castorama owner Kingfisher got a boost on Monday as Goldman Sachs upgraded its stance on the stock to 'buy' from 'neutral' and lifted the 12-month price target to 375p from 330p, saying the market is too sceptical on the 'One Kingfisher' efficiency strategy.
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It said that while management's plan may appear ambitious, its analysis suggests that Kingfisher should be able to deliver £300m of cost savings by FY21, versus Reuters consensus of around £250m and company guidance of £500m.
The bank said it expects earnings per share growth of around 13% per annum over the next three years and return on capital employed to increase to 12% from 10% by FY21. In addition, it said that strong macro indicators in France, along with a revamped online offer, should be tailwinds in FY19. GS noted that Kingfisher now has a new B&Q app and plans to relaunch its website/app in France, adding that online could contribute 100 basis points per annum to like-for-like sales.
"We believe the market is overly cautious and that, even on bear case assumptions, the stock is at a significant discount to its long-term average."
Kingfisher's efficiency programme aims to add £500m a year to profit within five years and return £600m to shareholders within three years.
At 1245 BST, the shares were up 2.1% to 316.90p.