Our view. While trading looks challenging and the group has significant exposure to a weak UK residential market, much bad news is now factored in to estimates. Over the medium term, as it delivers on its strategy, the group offers attractive value in our view. Merchanting seems to be in a better place, taking share with an offering more aligned to its customers. Toolstation remains frustrating in terms of the visibility of the profit trajectory, especially Europe, but management clearly believes in the model and continues to invest to support good growth and profits over the medium term; Toolstation UK should see good operating leverage from here. The group is more focussed on its core businesses and, after the poor share-price performance, we upgrade to BUY with a 1,120p price target. Results summary. Results were modestly weaker than we expected on a weaker-than-expected Q4 in Merchanting. Revenue was up by 8.9% to £4,995m (LFL +6.6%) with underlying profit at £285m (-6.3%). In 2022. Toolstation was the disappointing part of the business, with an operating loss of c.£9m, but Merchanting performed relatively well in a challenging market. Net debt was £819m, implying leverage of c.1.8times. Interim DPS was 39p. Outlook and estimates. Management is planning for mid to high single-digit market volume declines with price inflation at the same rate in 2023. After overhead inflation of +5-7% and £25m of cost savings, it expects to meet current market consensus. We adjust our FY23E underlying profit forecast (ex. property profit) to c.£254m, which is a c.10% fall year on year. Valuation. Shares reside on a FY23E PE multiple of 11.8x, but the real value in the shares is looking out to the medium term with the expected benefit from a more mature Toolstation and with Merchanting performing well.