Elm Co. (7203.SE): Digital resilience and Thiqah synergies support outlook; maintain Buy

Research evidence excerpt

Elm Co. (7203.SE): Digital resilience and Thiqah synergies support outlook; maintain Buy

Goldman Sachs Elm Co. (7203.SE)

impact appears concentrated in logistics-related products rather than across the

broader digital portfolio; (ii) management maintained guidance, implying continued

confidence that digital platforms / PPP opportunities can offset softer BPO trends; (iii)

only c.SAR20mn of the SAR315mn expected Thiqah synergies have been delivered so

far, leaving substantial remaining upside; (iv) Thiqah turned profitable in 2Q but remains

loss-making for H1, with management pushing toward near breakeven by year-end; (v)

BPO margins are under pressure, with 2Q gross margin around 17% versus a historical

19-23% range; and (vi) AI collaboration with HUMAIN is progressing, with phase one

infrastructure completed and further collaboration areas still under evaluation.

Key takeaways:

Macro impact is portfolio-specific: Geopolitical pressure is not broad-based. The most

visible effect has been on logistics products (Fasah), where trade disruption takes time

to flow through transaction volumes due to port inventory dynamics. Management does

not see the same lag applying to other digital products, and noted that government

spending shifts can create offsetting opportunities through PPP models and digital

platforms.

Guidance maintained; digital strength offsetting BPO pressure: Management

confirmed this dynamic explicitly. BPO at the Elm level continues to grow, but pressure

from outsourcing within subsidiaries is weighing on the overall segment. New BPO

projects are coming in at lower margins (around 17-20%, versus the historical 19-23%

range), reflecting pricing and project mix headwinds. The SAR4.8bn BPO backlog