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EdTech Giant Poised for 58% Stock Surge
4 Sep
Summary
- Motilal Oswal initiated coverage with a 'buy' rating.
- Stock price is predicted to surge 58% to ₹200.
- Company boasts a capital-efficient model and strong growth.
Motilal Oswal has initiated coverage on PhysicsWallah, assigning a 'buy' rating and projecting a potential 58% stock price increase to ₹200. This bullish outlook is underpinned by the company's efficient business model and promising growth trajectory within the EdTech industry.
The brokerage emphasizes PhysicsWallah's capital-efficient approach, which allows for cost-effective student acquisition and monetization across various platforms. The company has cultivated a substantial online presence with over 100 million YouTube subscribers and has achieved an impressive revenue compound annual growth rate (CAGR) of approximately 74% from FY23 to FY26.
While online penetration in core segments like JEE and NEET is around 20%, newer areas such as foundation courses and state board exams show less than 1% penetration, indicating significant future growth potential. The firm has also rapidly expanded its offline coaching network, establishing 353 centers.
Motilal Oswal anticipates continued online revenue growth at a 28% CAGR from FY26 to FY30E, driven by user expansion and AI integration. Furthermore, pre-Ind AS EBITDA margins are expected to improve from approximately 26% in FY26 to 30% by FY28E due to operational efficiencies.
However, potential risks include intensified competition, challenges in offline execution, faculty retention issues, and adverse regulatory changes. The brokerage values the offline business at 15x FY28E EV/EBITDA, contributing ₹4 per share, and other businesses at 1x FY28E EV/sales, contributing ₹1 per share.
