Why Bell Potter just upgraded this ASX 200 share to a buy rating

This share is exposed to structural growth tailwinds according to its analysts.

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The IDP Education Ltd (ASX: IEL) share price was on form on Wednesday.

The ASX 200 language testing and student placement company's shares rose 4.5% to $22.89.

Why did this ASX 200 share storm higher?

The catalyst for this gain is likely to have been a broker note out of Bell Potter this morning.

According to the note, the broker has upgraded IDP Education's shares to a buy rating with an improved price target of $27.

Even after today's strong gain, this price target implies a potential upside of 18% for its shares.

What did the broker say?

Bell Potter has been looking at student placement data and was pleased with what it saw in the Northern Hemisphere. It commented:

IDP's student placement (SP) volumes typically correlate with student visa data from key source markets […] 1HFY24 is typically seasonally weaker for SP volumes in Australia, which was evident in visas granted across IDP's key source countries in Q1 […] Northern hemisphere data on the other hand was encouraging, particularly for Canada. As the seasonally strongest quarter for both Canada and the UK, visa permits/ grants were +33% and -4% on the pcp to 302k holders (both ~60% higher than pre-pandemic levels).

Outside this, the broker likes this ASX 200 share due to its exposure to structural growth tailwinds. It adds:

Improving global mobility supported by the reopening of international borders, supportive government policies as well as the rising middle class in emerging economies and the increasing demand for an international education in English speaking countries remain key structural drivers of the Company's growth.

And while its shares are not conventionally cheap, the broker feels they deserve to trade at a premium. It concludes:

IDP is trading at a premium to the average EV/EBIT of education services peers in FY24e at 23.7x. However, we believe this is justified due to the Company's significantly larger scale and maturity.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Idp Education. The Motley Fool Australia has recommended Idp Education. 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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