First Berlin Equity Research has published a research update on PSI SE (ISIN: DE000A0Z1JH9). Analyst Simon Scholes upgraded the stock to BUY and increased the price target from EUR 25.00 to EUR 36.00.

Abstract
2025 is the first year of a planned three-year migration of PSI’s product portfolio towards a cloud/Software as a Service (SaaS) business model. We expect the migration to accelerate sales growth and widen margins by making PSI’s product offering easier to scale in both Germany (52% of 2024 sales) and internationally. Meanwhile, PSI’s decades of cross-vertical domain knowledge in industrial AI should heighten acceptance of the revamped product portfolio. Group sales grew at a CAGR of 6.9% during 2018-2023 while the EBIT margin averaged 7.0%. Adjusted for the end 2024 sale of the Mobility business unit, we model a 2023-28 sales CAGR of 8.7% and a 2028E EBIT margin of 12.5%. Recent newsflow indicates that PSI is making good progress with its business model transformation. In February, PSI’s work on developing its cloud-native next generation grid and energy management system, Control System of the Future (CSF), was validated by the conclusion of a long-term partnership with E.ON, one of the company’s most longstanding and important customers. The collaboration with Google announced in March will enable PSI to run its SaaS offerings over Google Cloud. The collaboration also enables PSI to modernise its software development environment through access to Google’s ecosystem. Continuous deployment of PSI’s new SaaS-based Warehouse Management System (Logistics business unit) and Manufacturing Execution System (Discrete Manufacturing business unit) is set to begin later this year while continuous deployment of the CSF is scheduled for 2026. ERP modules for the Discrete Manufacturing business unit and MES modules for the Process Industries & Metals business unit are due to follow in 2027 and 2028 respectively. Total investment in the German grid during 2025-45 is estimated at €528bn – equivalent to over €25bn annually. This compares with €17.8bn invested in 2023. To better capture this long period of supernormal growth, we have extended the explicit period of our DCF model from 2035 to 2040. This is the main factor behind the increase in our price target from €25 to €36 (upside of 36%). Our rating is now Buy (previously: Add).