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Issue The target principal name is incorrect

Whats the message when you click "View Certificate"? And which certificate is selected on Tools & Settings > SSL/TLS Certificates > Certificate for securing mail?
 
The incoming and outgoing mail server name in MS Outlook need to match the mail server name of your server (normally the host name).
 
With the current information it's hard to say what's causing the issue. But @Bitpalast suggestion is right. The host used in Outlook for incoming and outgoing mail server should match the host name of the server.
 
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