(Adds company comments, detail)
By Marie-France Han and Rhee So-eui
SEOUL, April 16 (Reuters) - South Korea's LG Electronics (066570.KS) bounced back to a first-quarter profit on Wednesday, powered by sales of high-end mobile phones and its LCD venture, but its plasma panel business faces an intensifying price war.
"The handset division will likely perform solidly this year with relatively strong sales, but there are risk factors such as the slowdown in the U.S.," said Kim Woon-ho, an analyst at Prudential Investment and Securities.
"The display division will surely be negatively affected by heightened competition in the TV market."
January-March net profit was 422.2 billion won ($425.8 million), rebounding from a 122.6 billion won loss a year earlier when display makers were hit by severe oversupply.
The net figure was down on the fourth quarter's 621.3 billion won, and fell short of a 470 billion won forecast by eight analysts polled by Reuters, mainly due to foreign exchange related losses.
But first-quarter operating profit was a record 564 billion won, well ahead of a market forecast for 362 billion won and almost matching the operating profit for the whole of last year.
LG said it expected earnings in the second quarter to improve further and added sales of its mobile phones this year are likely to exceed its target of 100 million units.
"Sales should show a solid growth of mid- to high-teens percent (from the first quarter). For profits, we expect a considerable increase, another solid result," Chief Financial Officer David Jung told an investor conference.
For more details, see company website at: here NU.jhtml
LG Electronics, 38 percent-owner of LG Display Co Ltd (034220.KS), benefited from another strong quarter at the world's second-biggest LCD panel maker, which last week posted record quarterly operating profit and looks set to gain further as the Beijing Olympics in August fuels demand for flat-screen TVs.
LG's own display division, which makes plasma panels, posted a 5.6 percent operating loss margin, a big improvement on a 16 percent loss margin a year earlier.
However, the company cautioned that aggressive flat-panel TV pricing by industry leader Sony Corp (6758.T) could spread throughout the industry and affect its plasma business, although it said it had not been impacted so far.
LG, which trails Nokia NOK1V.HE, Samsung, Motorola Inc MOT.N and Sony Ericsson (ERICb.ST) in handsets, is benefiting from the popularity of its new high-end, touch-screen Viewty phones.
LG sold a record 24.4 million phones in the first quarter, up from 23.7 million in the fourth quarter and above the 21.8 million units analysts expect No. 4 Sony Ericsson to sell in the same period. [ID:nL16667996]
First-quarter operating profit margin on handsets was 15.9 percent on a parent basis, almost double the previous quarter's 8.3 percent and against 6.6 percent a year earlier.
"We will be seeing a (handset) margin such as this one in the second quarter as well with a huge jump in quantity," said Harrison Cho, analyst at Mirae Asset Securities.
"It looks very likely there will be a slowdown in growth as of now, but even with less demand producers such as Samsung and LG are doing quite well, a trend likely to continue."
LG, which is also the world's top maker of household air conditioners, posted a slightly thinner 11.3 percent profit margin on its appliances, and predicted slow growth in the U.S. for the current second quarter.
Last week, U.S. conglomerate GE (GE.N) stunned markets with a 16 percent quarterly profit drop at its appliance-making industrial unit.
LG's quarterly revenue on a parent basis was 6.9 trillion won, up from 6.03 trillion won last year.
Net profit on a parent basis is forecast to grow 64 percent in 2008 to 2 trillion won, according to Reuters Estimates.
Shares in LG closed 0.4 percent lower at 132,500 won, erasing early gains and lagging the wider market's .KS11 0.9 percent gain. The stock rose 27 percent in January-March, outperforming the benchmark KOSPI's 10 percent slide. ($1=991.5 Won) (Additional reporting by Park Jung-youn, Park Ju-min, Lee Jiyeon and Kim Yeon-hee; Editing by Keiron Henderson & Lincoln Feast)