Shares of Physicswallah Ltd were trading higher in Monday's trade after HSBC initiated coverage on the stock with a 'Buy' rating and a target that suggested 27 per cent potential upside over the prevailing stock price.  HSBC said Physicswallah, which started as a YouTube channel in 2016, is now one of India’s leading education technology companies offering both online and offline courses. It sees Physicswallah gaining from strong demand for academic credentials across India, with the firm anticipated to report an Ebitda growth of more than 60 per cent, compounded annually, over FY26-30.

At 2 pm, the scrip as trading 2.11 per cent higher at Rs 111.01 apiece on BSE. HSBC said the seven-fold growth in adjusted Ebitda will be led by a 30 per cent growth in revenues and a sharp jump in margins – from 3.6 per cent in FY26 to 15 per cent by FY28. Execution is key in a highly localised and fragmented industry, particularly for Physicswallah's offline business, it said.

"The industry is highly fragmented, led by hyper-local institutes and “star” teachers with only a few national players, so execution is key. PW’s online model is affordable and scalable across the country. A large proportion of JEE aspirants are not targeting the very top institutes of technology; many are seeking admission to a credible engineering program at reasonable cost. For more aspirational learners, PW has expanded into offline classes which are now comparable in size to the online business, but with lower profits," HSBC said.

It expects operating leverage driven by improved utilisation as the primary driver of offline margin improvement. Physicswallah growth, the foreign brokerage said, is underpinned by strong demand for quality education and the desire to succeed in highly competitive entrance examinations. 

"The company is largely insulated from AI-driven disruption in India and relatively resilient during broader macroeconomic slowdowns. While favorable demographics – the average age in India is 28 – provide a structural tailwind, the employment backdrop is challenging," HSBC said. 

With job creation modest, academic credentials have become increasingly important to compete for limited opportunities, supporting growth in household spending on exam preparation.