Sentiment shift: Earnings upgrade to downgrade ratio improved after Q3

There are hopes of a turnaround in overall corporate earnings after six quarters of single digit growth

The headline corporate earnings in the third quarter of 2025-26 (Q3FY26) were ahead of market expectations, thanks to a surge in profits in oil & gas, mining & metals, public-sector banks and the automotive sector. This moderated the downgrade to upgrade ratio, but post-earnings downgrade exceeded upgrades. 

According to Yes Securities, 39 per cent of NSE200 companies saw 2 per cent or higher downgrades or cut in their forward earnings per share for FY27 after their Q3FY26 results. By comparison, around 28 per cent of index companies have seen earnings downgrade after Q2FY26 results. 

At the other end of the spectrum, 23 per cent of the companies in the index witnessed earnings upgrades after their Q3FY26 results, up from 20.6 per cent at the end of second quarter results. For comparison, 38 per cent of the firms saw no change in their FY27E EPS post Q3FY26 results, a decline from 51.5 per cent after Q2FY26 results. 

This has rekindled the hope of a turnaround in overall corporate earnings after six quarters of single-digit growth. Here are five companies each from BSE200 that have seen the biggest upgrades and downgrades in their forward EPS after their Q3FY26 results. This is an opportunity for investors to tweak their equity portfolio accordingly, as changes in companies’ EPS are likely to filter into their share price as well. 

Earnings upgrades

 

Vedanta

 

• The non-ferrous metals producer has seen a double-digit upgrade in its earnings as analysts expect continued bullishness in prices of silver, copper and aluminium 

• Its listed unit, Hindustan Zinc is one of the world’s top silver producers and has benefitted from a sharp rise in silver prices over the past 12-15 months 

• Analysts have raised Vedanta’s one-year share price target to ₹838 on average, compared to the current price of ₹723, indicating nearly 16 per cent upside 

• Vedanta’s earnings in Q3 also exceeded market expectations with consolidated net sales up 37.3 per cent Y-o-Y and net profit up 61 per cent to a record high 

• The company’s valuation has however become stretched with trailing price-to-earnings (P/E) of 29.4x and price-to-book value (P/BV) of 7x 

 

National Aluminium Company

 

* The public sector aluminium producer has also seen an earnings upgrade after Q3FY26 results, thanks to continued traction in metal prices 

  * Analysts have raised Nalco’s FY27 earning per share estimate to ₹32.2 on average from ₹26 at the end of December 2025

 

* There has, however, been no change in its target share price, largely due to a run-up in its stock 

* Nalco has been one of the top performers in metal space and its share price is up 104 per cent over the last one year

 

* In 9MFY26, the company’s net sales were up 11.4 per cent Y-o-Y, and net profit was up 26.2 per cent Y-o-Y

 

* Nalco’s earnings were, however, flat in Q3FY26, with just 1.1 per cent Y-o-Y growth, and its valuation has turned expensive with P/BV of 3.3x

 

 

Indian Oil Corporation

 

*  Analysts bet on improved cash flows as Indian Oil Corp (IOC) completes capex cycle

  *  Morgan Stanley expects IOC to gain market share in transport and aviation fuel segments in India, resulting in faster revenue and profit growth

  *  Analysts also expect a hefty dividend payout by IOC in FY26 and beyond, as its earnings and cash flows rise

  *  Its EPS estimate for FY27 has been raised to ₹20.1 on average from ₹17.5 at the end of December 2025, while its FY26 EPS has been upgraded to ₹22.8

  *  Earnings upgrade came after a strong showing in the first nine months of FY26

  *  IOC’s net sales were up 5.7 per cent Y-o-Y in Q3, while its net profit was up 515 per cent Y-o-Y during the quarter 

  *  The stock is currently trading at a relatively low valuation with trailing P/E of 7.73x and P/BV of 1.35x 

 

BSE

 

*  Stock exchange operator BSE has also seen upgrades by analysts after a strong Q3 show

  *  BSE’s FY27 EPS estimate has risen to ₹71.9 on average from ₹63.9 at the end of December 2025, and FY26 EPS to ₹58.2 from ₹53.8

  *  Analysts have also raised BSE’s forward price target, in line with a potential rise in its earnings

  *  BSE’s one-year target price has been raised to ₹3,415, translating into 29 per cent upside potential from the stock’s current levels

  *  In Q3FY26, BSE’s net revenue was up 62 per cent Y-o-Y to ₹1,244 crore while net profit was up 174 per cent Y-o-Y to ₹601.8 crore

  *  BSE’s valuation has however turned expensive with trailing P/E of 49.4x and P/BV of nearly 21x, which could weigh on the rally in stock 

 

Muthoot Finance

 

*  Muthoot Finance reported a strong show in Q3FY26, beating estimates on assets under management (AUM) growth, net interest margin expansion and credit cost

  *  Its gold loan portfolio hit an all-time high, pushing standalone AUM up 51 per cent Y-o-Y. Consolidated AUM rose 48 per cent Y-o-Y 

  *  Standalone net profit for 9MFY26 grew 91 per cent Y-o-Y, supported by operating leverage, benign credit costs and recovery-led income

  *  IDBI Capital pointed out that recent RBI relaxations on branch expansion are structurally positive and should support calibrated growth without operational friction

  *  Nuvama Research has a ‘Buy’ rating on Muthoot because its earnings are strong and better than peers, and it has the ability to shield loan yields from rising competition 

  Earnings downgrades

 

Tata Motors Passenger Vehicles

 

*  Q3 was weak for Tata Motors Passenger Vehicles (TMPV) due to a cyber incident-led production shutdown and lower dispatches at Jaguar Land Rover (JLR)

  *  While JLR’s revenue declined 39 per cent, its wholesale volume fell 43 per cent Y-o-Y due to production stoppage, lower despatches and ramping down of legacy Jaguar vehicles

  *  JLR saw a Y-o-Y contraction in EBIT margin due to negative operating leverage, US tariffs, higher variable marketing expenses and forex headwinds. Lower production and higher working capital led to negative free cash flow

  *  India business remained robust, showing sales growth of 24.6 per cent and volume growth of 22 per cent. With the domestic business outlook strong for Q4, TMPV is expected to outperform peers in FY26

  *  Given JLR-linked challenges, JM Financial Research has a ‘Reduce’ rating on the stock

 

 

Dixon Technologies

 

*  Weighed down by the mobile segment, which accounts for a bulk of its revenues, Dixon Technologies’ topline grew 2 per cent Y-o-Y in Q3

  *  The mobile segment grew 5 per cent Y-o-Y, its lowest in the last 16 quarters. Consumer electronics sales fell 10 per cent Y-o-Y in Q3, due to a slowdown after Diwali sales

  *  Elara Securities’ outlook remains clouded for mobile volumes due to delay in approval of Vivo & HKC joint ventures, and surging memory module prices, dragging down low-end mobile volumes

  *  Given the concerns, Elara has cut its earnings estimate for FY26 by 12 per cent, and for FY27 and FY28 by 19 per cent and 22 per cent, respectively 

 

Ambuja Cements

 

*  Adani group-owned Ambuja Cements has seen an decline in its FY26 and FY27 EPS estimates after a poor show in Q3FY26

  *  Consolidated net sales rose 9.2 per cent Y-o-Y in Q3, while net profit fell 90.6 per cent Y-o-Y in Q3

  *  Ebitda margins, excluding other income, was down nearly 500 basis points to 13.02 per cent in Q3FY26 from 18.19 per cent a year ago

  *  Analysts have cut Ambuja Cements’ FY27 EPS estimate to ₹17.8 on average from ₹20.3 at the end of December 2025. Similarly, FY26 EPS estimate has been cut to ₹14.7 from ₹16.4 earlier

  *  However, analysts see upside in Ambuja’s share price, and raised its one-year target price to ₹612, which is 25 per cent higher than its current share price

  *  The stock is currently trading at trailing P/E of 31.2x and P/BV of 2.2x, lower than its peers such as Ultratech Cement and Shree Cement 

 

 

Cipla

 

• Cipla’s Q3 show was muted due to the dual impact of declining sales of the generic version of cancer drug Revlimid and disruption in supply of acromegaly drug, Lanreotide 

• Sales in the US were down 26-28 per cent on a Y-o-Y and sequential basis. Gross margins fell 520 basis points and operating profit margins slipped over 10 percentage points Y-o-Y 

• Net profit fell 21.6 per cent Y-o-Y to ₹114.4 crore, from ₹184 crore in Q1FY25 and ₹172.40 crore in Q4FY25 

• Cipla cut its operating profit margin guidance for the second straight quarter, with a 250 basis point reduction in Q3 due to Revlimid/Lanreotide issues, and higher research and development spends 

• Emkay Research remains cautious, citing concerns about the December quarter and Lanreotide, which it believes mark the beginning of an earnings downgrade cycle, with more cuts likely 

 

 

PI Industries

 

*  PI Industries’ domestic business declined 8 per cent Y-o-Y in Q3 with volumes falling 2 per cent due to lower farmer offtake for high-value products 

*  Demand was dented by erratic monsoons, weak realisation in key crops, and delay in normalisation of the biological portfolio

  *  Custom synthesis and manufacturing exports were down 32 per cent Y-o-Y, marking the fourth consecutive quarter of sales decline. High inventories and lower global demand hurt this segment’s sales

  *  JM Financial Research does not foresee any material improvement in the topline until at least the end of CY26, due to slow demand from Kumiai, threat of upcoming pyroxa generics in the US and ex-pyroxa product portfolio continuing to struggle for growth over the last five-six years