Robbing Peter to pay Paul?

Research evidence excerpt

Robbing Peter to pay Paul?

Macquarie Equity Research IDP Education

Valuation and earnings changes

Valuation

We derive our 12-month target price of $2.30 (previously $2.35) based on the blended

average of DCF and PE relative valuations. We detail both methodologies below:

• DCF: We use a three-stage DCF (0-5 years, 5-10 years, and 10+ years) with varying WACCs

for each period, driven by both differing cost of equity and cost of debt. We adopt a three-

stage DCF by capturing MRE estimates for 0-5 years and a view around medium-term

growth for 5-10 years, before reverting terminal growth to historical GDP levels. Our RFR

varies based on each timeframe.

• PE relative: Our PE relative valuation reflects the stock's historical average PE relative of

0.75x applied to the current 12-month forward PE for the S&P/ASX200.

Figure 1 - Macquarie IEL valuation assumptions

DCF valuation PE Relative valuation

Beta 1.30 ASX200 12mth forward PE 16.7

WACC RFR WACC Assumed PE Rel 0.75

0-7 year 4.3% 10.3%

8-10 year 4.7% 10.6%

+10 years 4.8% 10.8%

Terminal growth rate 3.0%

Valuation (A$) 2.37 Valuation (A$) 2.27

Target Price (A$) 2.30

Source: Company data, Macquarie Research, June 2026

Earnings changes

We revise our EPS by +3.1% in FY26E, -4.7% in FY27E and -11.2% in FY28E, reflecting revised

FY26 guidance and a more conservative outlook for volumes from FY27E and particularly

FY28E. In particular, we capture further headwinds to student placement volumes from

election cycle risks and further headwinds to IELTS volumes from TOEFL traction offset by

continued success in China.

Figure 2 - IEL Financial forecasts

Revised estimates Prior estimates Difference (%)

Consolidated P&L FY26E FY27E FY28E FY26E FY27E FY28E FY26E FY27E FY28E