Sharp Corp <6753.T> beat market expectations with a forecast for annual operating profit to more than double to its highest in three years, after it swung to a quarterly profit on strong sales of display and solar panels.

The Japanese maker of Aquos LCD TVs trails Samsung Electronics <005930.KS>, Sony Corp <6758.T> and LG Electronics <066570.KS> in LCD TVs. But it is benefiting from cost-competitive display panels made at its cutting-edge Japanese LCD plant that came onstream in October.

Sharp's forecast partly reflects the company's plan to begin selling 3D-capable LCD TVs this year, joining the market for what is expected to be the industry's next hot product.

Strong Chinese demand for flat-screen TVs is brightening up the outlook for the global LCD sector, while increasing spending by businesses and consumers on computers, flat-screen TVs and new gadgets is also supporting the electronics industry.

Sharp expects operating profit to total 120 billion yen ($1.3 billion) for the year to March 2011, above the consensus of a 112.9 billion yen profit in a poll of 22 analysts by Thomson Reuters I/B/E/S.

It is notable that sales of highly profitable items such as large-sized TVs, LCD panel supplies and solar cells are growing, said Seiichiro Iwamoto, a senior fund manager at Mizuho Asset Management.

But the market has already factored the earnings recovery into the stock.

Sharp expects double-digit revenue growth in all of its four main products this year -- LCD TVs, LCD panels, mobile phones and solar cells.

SOLAR CELL SALES TO RISE

Sharp spent heavily in its panel and solar cell capacity despite the global downturn, and it now hopes to reap the fruits of its aggressive investments as the overall economy picks up.

The company started output at a new solar cell factory last month, and plans to double output capacity at its flagship LCD plant in July, three months ahead of its original schedule.

The panel plant is the world's first factory to process so-called 10th-generation glass substrates, which are bigger than earlier generation substrates and help cut per-panel production costs, giving Sharp a competitive edge against rivals such as Samsung.

Sharp expects favourable market conditions for LCD panels to last for an extended period.

Given strong demand for LCD TVs and robust PC sales, there's bound to be a shortfall in panel supply, and the situation will stay that way this year and probably next business year as well, Sharp President Mikio Katayama told a news conference.

Sharp aims to sell 15 million LCD TVs this financial year, up 47 percent from last year. It is targeting a 16 percent rise in LCD panel sales to 1.03 trillion yen.

Sharp is also the world's third-largest solar cell maker behind First Solar and Suntech Power Holdings Co and is seeing brisk demand in Japan thanks to government subsidies for households to install solar panels.

Sharp's new solar cell plant produces thin-film solar cells, which are cheaper to make than conventional silicon-based solar cells and suitable for use in large-scale solar power plants.

It aims for solar cell sales of 250 billion yen in the year to next March, up from 208.7 billion yen last business year.

Sharp accounted for 5.8 percent of global solar cell output in 2009, after First Solar's 10.4 percent and Suntech's 7.2 percent, according to research firm iSuppli.

Sharp reported an operating profit of 29.3 billion yen in January-March, the final quarter of last financial year, a reversal from a loss of 90.4 billion yen a year earlier.

Before the results, Sharp shares closed up 2 percent, outperforming a 1.6 percent rise in the Tokyo stock market's electrical machinery index <.IELEC.T>. The stock has gained 5.4 percent so far this year through Monday versus a 15.5 percent rise in the sector index. ($1=94.02 Yen) (Additional reporting by Yumi Horie, Elaine Lies and Nathan Layne; Editing by Michael Watson)

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