Pricing power: 3 ASX shares I think have what it takes to do well during inflation

Inflation could be a net benefit for these high-performers.

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The world economy has seen some of the strongest inflation for decades, which has had plenty of widespread impacts. It has hurt ASX share valuations and led to central banks around the world trying to reduce inflation with higher interest rates.

Some businesses are facing higher costs and very limited opportunities to increase revenue.

However, other ASX shares can come out ahead during this period if they're able to pass on price increases to customers and improve profit margins. They could be very effective inflation hedges. Here are three such shares.

Telstra Group Ltd (ASX: TLS)

Telstra is the largest telco company in Australia and is investing in its 5G network to try to expand its market leadership. Given its position in the country, it has felt able to pass on price rises to its subscribers.

The ASX share has increased prices for customers in line with inflation, as measured by the consumer price index (CPI). This led to the business announcing that its 'upfront mobile plan essential' would increase by $4 per month and the 'upfront mobile plan premium' would increase by $6 per month from 4 July 2023.

The FY23 result showed how it's helping deliver revenue growth and profit growth. Telstra's total income rose 5.4% to $23.2 billion and earnings per share (EPS) grew by 16%. Its mobile segment saw postpaid handheld average revenue per user (ARPU) increase 5.4% to $51.15 per month.

With the company implementing more price increases for FY24, it could be another year of solid financial growth for the company.

Brambles Limited (ASX: BXB)

Brambles is a business that's involved in global logistics. It has pallets, crates, and containers and services customers in a number of different industries such as dry food, grocery, health, personal care, fresh produce, retail, and general manufacturing.

The ASX share achieved strong double-digit growth in FY23. Continuing operations sales rose 10% to US$6 billion and operating net profit after tax (NPAT) rose 13% to US$647.1 million.

Brambles is an essential business. Many other companies wouldn't be able to move their goods around the world without its services. Its large scale gives it pricing power over competitors but it also means it can pass on price rises to customers.

The company revealed that in FY23, prices increased by 16% reflecting "contributions from contractual repricing and indexation initiatives taken in both the current and prior year as well as specific pricing actions to address high-risk lanes".

Propel Funeral Partners Ltd (ASX: PFP)

Propel is the second-largest funeral provider in Australia and New Zealand. It's able to pass on inflation to customers in the form of more expensive funeral prices.

In FY23, the ASX share reported the average revenue per funeral increased by around 6% to $6,400, while the comparable average revenue per funeral was up 7%.

This organic revenue growth, combined with the benefits of acquisitions, led to the business being able to report total revenue growth of 16% and operating NPAT increased 17.9% to $20.9 million.

The company said that in FY24, it's expecting to benefit from "favourable demographics" in Australia and New Zealand. It also cited its available funding capacity and the "acquisitions completed and announced to date, as well as other potential future acquisitions in what remains a highly fragmented industry".

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Propel Funeral Partners. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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