Shares of Indian educational technology firm Physicswallah (PWL) experienced a significant surge, climbing nearly 9% on the BSE. This robust performance followed Motilal Oswal Financial Services initiating coverage on the stock with a 'BUY' rating, projecting a substantial 66% upside.
The brokerage firm set a target price of Rs 200 for Physicswallah, a considerable increase from its previous closing price of Rs 120.55. Motilal Oswal's investment thesis, titled "Affordable education, scalable economics," highlights Physicswallah's position as one of India's largest education platforms, known for its capital-efficient model within the EdTech sector.
Strong Online Education Model and Market Potential
Physicswallah has cultivated a vast online presence, boasting over 100 million YouTube subscribers. This extensive reach allows the company to establish a large free-to-paid user funnel, enabling student acquisition at structurally lower costs. These students are then monetized through a range of online, hybrid, and offline educational offerings.
The company has demonstrated impressive financial growth, with revenue expanding at a compounded annual growth rate (CAGR) of approximately 74% between FY23 and FY26. Motilal Oswal points to India's expansive education market, estimated at Rs 15-16 lakh crore, which remains significantly underpenetrated online. Flagship categories like JEE and NEET see around 20% online penetration, while newer segments such as foundation courses, state boards, and government exams have less than 1%.
Future Growth in Online and Offline Segments
Looking ahead, Motilal Oswal anticipates Physicswallah's online revenue to grow at a CAGR of about 28% from FY26 to FY30. This growth is expected to be driven by an increase in paid users, strategic expansion into new course categories, and innovative AI-led monetization strategies. The brokerage also projects an improvement in pre-IND AS Ebitda margins for the online business, from approximately 26% in FY26 to around 30% by FY28.
While the offline business is viewed as a higher Average Revenue Per User (ARPU) monetization layer rather than the primary value driver, it has also seen considerable expansion. Physicswallah grew its offline center count from 28 in FY23 to 353 by the end of FY26, with offline revenue growing at an 85% CAGR during the same period to Rs 1,770 crore. The aggressive expansion phase is reportedly nearing its conclusion, which is expected to enhance unit economics and profitability.
Profitability and Valuation Outlook
Approximately 80% of offline admissions are sourced from Physicswallah's existing online user base, demonstrating a synergistic model. Motilal Oswal forecasts the offline business to maintain a 20% revenue growth CAGR between FY26 and FY30, with pre-IND AS Ebitda margins projected to reach 3% by FY28 as centers mature and utilization increases.
The brokerage utilized a sum-of-the-parts valuation approach, assigning a 50-times FY28E EV/Ebitda multiple to the online business (valuing it at Rs 172 per share) and a 15-times multiple to the offline business (contributing Rs 4 per share). Other businesses contributed Rs 1 per share, and cash added Rs 20 per share. This analysis led to the target price of Rs 200 per share, reinforcing the 'BUY' recommendation.