MSC Industrial Direct (MSM), mcap=$4.4bn, price $79.2 vs $82.86

Pitch: Leader in fragmented industry positioned to continue increasing market share and improve margins. Trades at a steep discount to peers. Distributor servicing maintenance and repair industry in N.A. About 2m SKUs, 80% focused on heavy manufacturing. Closely exposed to the industrial production cycle. Expected to benefit from onshoring and customers’ desire to reduce supply chain risk.

Valuation: MSM trades at 11.5x EBITDA, in line with the historical avg – this valuation fails to reflect re-rating experienced by peers. The closest comparables FAST and GWW trade at 22x and 16x EBITDA respectively. $150/share target at 16x EBITDA.

Exp. gain: +80% to $150/share

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