First Berlin Equity Research has published a research update on PSI SE (ISIN: DE000A0Z1JH9). Analyst Simon Scholes reiterated his BUY rating and decreased the price target from EUR 30.00 to EUR 28.00.

Abstract
PSI is emerging from a two-year period of turbulence which encompassed three profit warnings (two in H2/22 and one in H2/23) and a cyber attack in mid-February 2024. The profit warnings in 2022 and 2023 stemmed from higher than expected costs in connection with Redispatch 2.0 projects in Germany which PSI was unable to pass on to customers. The impact on 2022 and 2023 EBIT was €5m-€6m and €17m respectively. The federal regulator has meanwhile imposed a moratorium on further work on Redispatch 2.0 while specifications are finalised. In contrast to 2022 and 2023, PSI will contractually ensure that it is able to bill customers for any further specification changes once work on Redispatch 2.0 resumes. In mid-February 2024 PSI suffered a cyber attack on its IT systems. The company has only recently restored its IT systems to full functionality, and work on some ongoing projects has been delayed. PSI has indicated that the cyberattack is likely to reduce sales by €20m-€30m this year, while 2024 EBIT guidance is for a negative figure in the high single digit to low double digit €m range. Management say the cyber attack has not caused loss of clients and so we expect 2025 numbers to benefit from sales held over from 2024. We further expect the Energy Management segment’s EBIT margin to return to around the level recorded in 2023 clean of the Redispatch 2.0 cost overrun (6.5%) next year, and the EBIT margin at Production Management to return to the 13%-15% generated in recent years. PSI has committed to achieving a double digit EBIT margin at Energy Management in the medium term (5 years). Under CEO Robert Klaffus (joined PSI on 1 November 2023), reaching this target is likely to entail a faster transition to cloud-native software than his predecessor Dr Harald Schrimpf envisaged. We also expect this stronger emphasis on cloud-native software to apply to access to cloud-based Production Management software (the AppStore). Management will reveal more detail on these issues at a capital markets day in Frankfurt on 17 September. Having reworked our forecasts, we see fair value for the PSI share at €28 (previously: €30). We maintain our Buy recommendation.