In an era of high inflation, most businesses are having to deal with more expensive supply costs.
So you might be surprised to find a S&P/ASX 200 Index (ASX: XJO) company that is enjoying falling input costs.
And investors could surmise that will be a competitive advantage.
The team at Firetrail thinks CSL Limited (ASX: CSL) is precisely in this enviable position.
'Counter-cyclical nature' of this input cost
One of the big activities for CSL is the collection of blood plasma. While paying donors is illegal in Australia, in the US that is the norm.
The Firetrail analysts' interest in the biotechnology giant piqued recently when it heard a juicy tidbit from a plasma collection rival.
"At its June 2022 result, CSL's competitor Takeda Pharmaceutical Co Ltd (TYO: 4502) announced that the fees it pays to plasma donors have reduced by 15% per litre," read their memo to clients.
During the first couple of years of the COVID-19 pandemic, donor numbers plunged as communities were locked down or people were reluctant to physically visit donation centres.
This meant that donor compensation was raised to provide a higher incentive, and to compete with "substantial levels of fiscal stimulus".
But now as the US shifts to post-COVID life, these fees can be reduced.
"We could see that reverse now that household budgets are becoming more stretched," said the Firetrail team.
"The counter-cyclical nature of this cost driver is one of the key underpinnings to our positive investment thesis on CSL."
2022 bad, 2023 good
The Firetrail team is not the only one bullish on CSL's future.
The CSL share price on Wednesday morning plunged 4.8% after it released its financial results, which saw net profit fall for the 2022 financial year.
But both S&P Global Ratings and Moody's cited the pending growth in plasma collections as a major tailwind for financial year 2023.
"Significant growth in the volume of plasma collected mitigates any concern around inventory, despite higher donor costs," said Moody's Investors Service vice president Ian Chitterer.
"The influenza business continues to perform strongly with record sales once again over the year."
CSL shares are up just 0.38% for the year-to-date. It is still yet to re-touch its pre-COVID highs.
