Morgans said operating leverage and margins will come into keen focus in August reporting season.
February reporting season showed that S&P/ASX 200 companies with competitive edges and/or dominant market positions are more effective at offsetting margin pressures, Morgans analysts said in a 'Reporting Season Playbook' note last week.
Factors which support tenacious margins include:
Cost out (large cap franchises, banks and telcos)
Product premiumisation (high end retail)
Productivity gains (materials, banks)
Cost pass through (industrials, discretionary)
The broker called out key "all-weather companies" that are best positioned to fend off rising cost inflation.
Dominant market position. Margin pressure offset by cost out, store renewal and convenience programs
Dominant market position. Cost out program to offset packaging inflation. Has strong penetration with high margin private label products
Dominant market share. Plasma collections expected to recovery, buoys margins
Dominant market position with growing penetration in emerging and development markets
Leader in flexibles and rigid plastics with "in-built rise and fall mechanisms" to offset higher raw material prices. Can pass on higher prices
Dominant market position. Has the ability to exploit market position and lift prices
Sheltered from increases in fuel costs due to long-term contracts or its own mining operations
Dominant market position and able pass on higher prices
Strong volumes reflect the company's "essential service status". Potential to raise prices in FY23
Positioned for travel rebound, with higher market share and lower cost base than pre-covid levels
Leading market position in land-based gaming products with strong pricing power
Market leading brands and now focused on 'premiumisation' strategy
High-end cooling solutions with little to no competition
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