Rexel is trading at peak valuation - will the new margin ambitions be achieved? Valuation already subscribing to the bull case - stay Neutral We believe the shares are fairly pricing in a sustained period of positive top-line growth over the next 3 years, but struggle to see further upside beyond a 6% EBITA margin by 2023. The shares are trading at peak EV/Sales of 0.56x, implying a return to peak margin, in line with Rexel''s new mid-term ambition. In this note, we analyse Rexel''s new revenue and EBITA margin targets for 2023 and expect the company to outperform market growth by +70bps over 2021-23, but only see gradual EBITA margin expansion towards 5.5% by 2023e (from 4.2% in 2020 and 5% by 2021e). If we were to assume a 6% EBITA margin by 2023, our fair value would suggest 6% upside to the current share price, whereas a 5% margin (fairly stable beyond 2021) would imply -17% downside. Overall, we see a balanced risk reward with good earnings momentum offset by a full valuation. Digitalisation - a step-up or catch-up? Rexel''s digitalisation strategy is playing a key role in helping it catch up after the last few years of underperformance. We think the latest investments in digital combined with a step change in online penetration during COVID19 will lead to some short-term gains and lift Rexel''s gross margin to a new baseline in 2021, but beyond that we only see small marginal gains being retained, hence we stand -50bps below the mid-term margin guidance. As we look for competitors with a larger online wallet, we see no evidence of long-term margin expansion through an increase in digitalisation. Can Rexel stop losing market share in a more consolidated market environment? We have done extensive peer comparison analysis, and conclude that Rexel continues to lose market share in the US. Rexel will likely benefit from increased market consolidation (without having to pay for it) with the acquisition of Anixter by Wesco, but will also lose...