Just picked up a ptr msg91 - groups suck any advice

So I picked up a "used" owner said never shot it and it actually looked never cycled there was no wear anywhere.

I have taken out two times and have just under 100 rds through it of US late 60s surplus, new manufactured ppu, and a few groups of hand loads that were set up for my buddies 700 42.5gr varget 175 smk. Everything posts 3in plus groups at 100yrds. I am not looking for the 1/4in groups my TRG shoots or the 1/2 groups my buddies 700 shoots but 3 moa plus for the MSG model is a bit out of line even my starndred Ruger 77 hunting rifle will better 1" groups with these rounds.
I am also noticing a ton of blow by on the spent brass (this is my first g3 pattern rifle and first ptr so I don't know if this is normal).

Any advice?? This firearm is no good and no where near worth the retail price if this is all it is capable of.
Thanks guys