Deutsche Bank upgrades Kingfisher to 'buy'

The bank noted that home improvement grew during Covid and while this trend is moderating, there are some attractive longer-term drivers of category spend and Kingfisher is well placed to take advantage of this.

DB said the trade element is expected to see stronger growth than DIY over the next few years, and this accounts for around 50% of the business.

"With cash on the balance sheet supporting share buybacks why is the stock trading at circa 8.5 x FY23 e PE? The issue in our view is investor uncertainty over consumer spending and fear of a slowdown in housing transactions and big ticket spend," it said.

Deutsche said pre-tax profit is set to decline in FY23 but as we head through this year it expects investors to look forward to the earnings growth in FY24.

"We lower our forecasts slightly but upgrade our recommendation to buy given the cheap valuation, better earnings resilience that many expect and ongoing investments being made into the business for longer-term optionality."

DB cut its price target on the stock 335p from 355p.

At 1100 BST, Kingfisher shares were up 1.6% at 262.10p.