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13 ASX 200 companies that can combat inflation: Morgans

Tue 19 Jul 22, 3:21pm (AEST)
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Key Points

  • Morgans calls out 13 "all-weather" companies most capable of offsetting cost inflation
  • Operating leverage and margins will come into focus this reporting season
  • Companies with competitive edges and/or dominant market positions are more successful at offsetting margin pressures

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.

Morgans' all-weather companies

Company

Reason

Woolworths

Dominant market position. Margin pressure offset by cost out, store renewal and convenience programs

Coles

Dominant market position. Cost out program to offset packaging inflation. Has strong penetration with high margin private label products

CSL

Dominant market share. Plasma collections expected to recovery, buoys margins

ResMed

Dominant market position with growing penetration in emerging and development markets

Amcor

Leader in flexibles and rigid plastics with "in-built rise and fall mechanisms" to offset higher raw material prices. Can pass on higher prices

REA Group

Dominant market position. Has the ability to exploit market position and lift prices

AGL

Sheltered from increases in fuel costs due to long-term contracts or its own mining operations

Seek

Dominant market position and able pass on higher prices

ALS

Strong volumes reflect the company's "essential service status". Potential to raise prices in FY23

Corporate Travel

Positioned for travel rebound, with higher market share and lower cost base than pre-covid levels

Aristocrat

Leading market position in land-based gaming products with strong pricing power

Treasury Wines

Market leading brands and now focused on 'premiumisation' strategy

PWR

High-end cooling solutions with little to no competition

Source: Morgans

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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