First Berlin – PSI AG Research Update (02/04/2019)

First Berlin Equity Research has published a research update on PSI AG (ISIN: DE000A0Z1JH9). Analyst Simon Scholes reiterated his ADD rating and maintained his EUR 19.00 price target.

2018 results showed a 7.0% increase in sales to €199.2m (FBe: €198.9m; 2017: €186.1m) and a 15.6% increase in EBIT to €15.5m (FBe: €15.2m; 2017: €13.4m). The numbers were close to our forecasts and management guidance for sales and EBIT of €200m and €15m respectively. The group EBIT margin climbed from 7.2% to 7.8% driven by a 200 basis increase in the EBIT margin at the Energy Management division. We continue to expect the group EBIT margin to rise over the next three years as R&D costs and cost of goods sold fall as a percentage of sales with the completion of software platform harmonisation. Order intake growth of 14.2% was helped by late-cycle investment and also by customer acceptance of new products in growth areas such as Industrie 4.0, intelligent integration of electromobility into local transmission networks, grid configuration for the future structure of electricity generation, and mathematical processes which simulate energy networks under sector coupling scenarios. PSI gave no update to ?Vision 2022? during the analysts' conference for the 2018 results. For 2022 we previously assumed sales of €235m and an EBIT margin of 10.0%. Following the PRINS acquisition from BTC AG we adjust these figures to €251m and 9.6% respectively. The downward adjustment in the EBIT margin reflects the shift in the sales mix towards the lower margin Energy Management division. We maintain our Add rating and price target of €19.00.