Broker tips: Rosebank Industries, Kingfisher, Grafton
By Iain Gilbert
Date: Friday 31 Oct 2025
(Sharecast News) - Citi initiated coverage of Rosebank Industries on Friday with a 'buy' rating.
It said Rosebank's business model was to "buy, improve, sell" industrial businesses, and the creation of the company was aimed to emulate the success of Melrose, from where the Rosebank management team have largely come.
"The first acquisition, ECI, was bought in August 2025; the target to improve EBIT margins from 13% to 18% is a key driver behind the intention to double shareholder value over 3-5 years," it said.
"With a strong management track record on delivering turnarounds, we initiate with a buy."
Analysts at RBC Capital Markets slightly lowered their target price on builders merchants Grafton from 1,220p to 1,190p on Friday, as it pushed out the group's recovery.
RBC Capital said it likes Grafton for its proven quality, earnings recovery potential and balance sheet firepower, but stated that it move to push out the group's recovery had drived a -1.5%/-10.8%/-11.1% reduction to its FY25-27 adjusted earnings per share estimates and left it in line with consensus for FY25 and 4% below in FY26/27.
The Canadian bank sees recovered adjusted earnings per share at more than 98p, excluding 10-20% accretion potential from its roughly £300m firepower, rising to approximately £475m.
"Assuming a 50-50 split between buybacks and M&A, £475m could drive c.20% adj. EPS accretion by FY27e. On a more conservative approach, maintaining the capital allocation run rate of c.£120m p.a. (average since FY19) implies c.10% accretion to FY27e, incremental to our estimates. Boltons in Iberia appear the most likely candidate, in our view," said RBC, which reiterated its 'outperform' rating on the stock.
RBC added that Grafton trades on 13.1x CY26e price-to-earnings ratio, falling to roughly 10x on recovered adjusted earnings per share, versus its 14x long-term average.
Berenberg has reiterated a 'hold' rating on Kingfisher ahead of the DIY retailer's third-quarter update next month, highlighting concerns about profit margins amid a mixed market backdrop.
While home-related retail sales trends look supportive in the UK - which accounts for more than half of Kingfisher's revenues - trading across France and Poland has been "more challenging" in recent months, Berenberg said.
The broker has pencilled in 2.2% like-for-like sales growth in the UK for the three months to 31 October, countered by a 4.5% decline in France and a 2.0% drop in Poland. As a result, group LFL sales are expected to have fallen by 0.3% over last year.
Berenberg has lowered its profit estimates, due to a "slightly less enthusiastic approach to the margin trajectory", dampened by tough conditions in France and Poland, along with rising employee cost pressures. However, the broker still estimates that the full-year adjusted pre-tax profit will be £548m, up 4% over last year at above the top end of company guidance.
In addition, Berenberg said that while Kingfisher's recent launches of ecommerce marketplaces across its major markets could be positive for profitability, "margins remain low in absolute terms, along with sales densities and ROIC".
The shares trade at 11x earnings, which the broker said "looks undemanding".
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