Physicswallah shares jump 9% as Motilal Oswal sees 66% upside

Motilal Oswal Financial Services has initiated coverage on the stock of educational technology company Physicswallah with a BUY call. It assigned a target price of Rs 200, implying an upside of 66 per cent from the current market price of Rs 121. The brokerage has termed its investment thesis "Affordable education, scalable economics."

Shares of Physicswallah climbed as much as 8.55 per cent to hit a high of Rs 130.85 on the BSE, compared with their previous close of Rs 120.55.

Strong online education model

Motilal Oswal said Physicswallah Ltd is among India's largest education platforms and has built what it considers one of the most capital-efficient models in the Indian EdTech sector. The company has developed a large free-to-paid funnel through YouTube, allowing it to acquire students at structurally lower costs and monetise them through online, hybrid and offline offerings.

The brokerage noted that Physicswallah has more than 100 million YouTube subscribers and has grown its revenue at around 74 per cent compounded growth rate annually between FY23 and FY26.

Education market offers long runway

Motilal Oswal said India's education market, estimated at Rs 15-16 lakh crore, remains significantly underpenetrated online. Online penetration in flagship categories such as JEE and NEET is around 20 per cent, while newer segments including foundation, state boards and government exams have penetration of less than 1 per cent.

The brokerage expects Physicswallah's online revenue to grow at around 28 per cent compounded annually between FY26 and FY30, supported by paid-user growth, expansion into new categories and AI-led monetisation. It expects pre-IND AS Ebitda margins in the online business to improve from around 26 per cent in FY26 to around 30 per cent by FY28.

Offline expansion entering profitability phase

Motilal Oswal said the offline business should serve as a higher-ARPU monetisation layer rather than the company's primary value driver. It expects offline revenue to grow at around 20 per cent compounded annually between FY26 and FY30, with profitability improving as recently opened centres mature and utilisation increases.

Physicswallah expanded its offline centre count from 28 in FY23 to 353 by FY26-end, while offline revenue grew at around 85 per cent compounded annually over the same period to Rs 1,770 crore. The brokerage believes the aggressive expansion phase is now nearing its end, which should help improve unit economics.

Around 80 per cent of offline admissions originate from Physicswallah's online base, according to the brokerage. It expects the offline business to deliver around 20 per cent revenue growth compounded annually between FY26 and FY30, while pre-IND AS Ebitda margin is expected to reach 3 per cent by FY28.

Target price

Motilal Oswal values Physicswallah using a sum-of-the-parts approach. It assigns a 50-times FY28E EV/Ebitda multiple to the online business, valuing it at Rs 172 per share, while the offline business is valued at 15 times FY28E EV/Ebitda, contributing Rs 4 per share. Other businesses are valued at 1 times FY28E EV/sales, contributing Rs 1 per share, while cash contributes Rs 20 per share.

After adjusting for cash, the brokerage arrives at a target price of Rs 200 per share, implying a 66 per cent upside, and initiated coverage with a BUY rating.