Mechanically adjusting for repayment of UK business rates Having already repaid the furlough support given by the UK government, today Kingfisher announced that it would repay the business rate relief. This would have saved GBP 130m, spread over two years. This materially reduces current year EPS expectations but only represents around 2% of the market capitalisation, hence our target price falls to 320p. No real surprises: business rates being returned Kingfisher joins the supermarkets and several other retailers deemed as ''essential retail'' (e.g. BandM, Pets at Home) in repaying the government support it received during the pandemic. This was due to reduce operating costs by GBP 110m in the current financial year and GBP 20m in the next. Although Kingfisher was permitted to trade throughout the first lockdown, recall that its stores remained closed for several weeks and as a result group Q1 LFLs were -24.8% and consequently full year LFLs will likely ''only'' be around +5%. Current trading indicated as remaining strong Kingfisher had already reported its sales performance to 14 November and today''s statement merely comments qualitatively that it is experiencing ''continued positive trading momentum''. We take some encouragement from this given concerns about DIY falling in importance for the consumer post-lockdown and also given some high frequency data from BDO had suggested a slowdown in its broad ''lifestyle'' category. A mechanical downgrade, view unchanged Our Jan-21e (company-defined) Adj PBT falls from GBP 810m to GBP 700m as the cost relief is stripped out. The stock trades on CY 2021 P/E of 11.4% and FCF yield of over 8%. Our target price is based on long term operating margins recovering to 7%, which is about 50bps higher than current year margins if all cost savings are excluded. We think this will come through from the ''Powered by Kingfisher'' strategy over the next few years.