TPV Technology said third-quarter profit rose 26% as the world’s biggest contract maker of computer monitors increased sales of flat-panel televisions.

Net income advanced to US$39.5 million, or 1.73 cents a share, from US$31.4 million, or 1.4 cents, a year earlier, TPV said in a statement to the Hong Kong stock exchange today. The company was expected to report a profit of US$41 million, the median of three analysts’ estimates in a Bloomberg survey.

TPV, a supplier to Sharp Corp. and Royal Philips Electronics NV, stepped up television production to compensate for declining demand for computer screens. The company, partly owned by Chi Mei Optoelectronics Corp., said this month that its relationship with the investor won’t change after the Taiwanese liquid-crystal panel maker said it plans to combine with Innolux Display Co.

“Innolux is the biggest competitor to TPV” in the computer-monitor market, Eddie Lau, an analyst at Citigroup Inc., wrote in a Nov 17 report. “We think TPV will gradually reduce its reliance on” Chi Mei, the report said.

Chi Mei, Taiwan’s second-biggest maker of LCDs, said on Nov. 14 that it will merge with Innolux in a transaction valued at NT$172 billion ($7.4 billion). The combined company will overtake AU Optronics Corp. as the island’s biggest maker of LCDs, used in producing televisions and computer screens.

Margin Decline
TPV fell 0.57% to HK$5.23 (93.5 cents) in Hong Kong trading today before the earnings announcement, and has surged 109% this year. Its Singapore-listed stock fell 1% today.

The company’s third-quarter sales fell to US$2.26 billion from US$2.36 billion a year earlier. TPV said its gross profit margin fell to 5.3% in the third quarter from 6.1% a year earlier as it had to absorb part of the increase in the cost of key components to win sales.

Innolux, an affiliate of Hon Hai Precision Industry Co., accounted for 23.4% of global shipments of computer monitors in the first half, according to Citigroup’s Lau. TPV’s share was 27.3%, according to Lau.

Chi Mei is the biggest supplier to TPV, Morgan Stanley analyst Frank Wang wrote in a Nov 19 report. In 2007, the Taiwan company acquired a 7.7% stake in TPV.

TPV said this month it will form a venture in China with LG Display Co. to make LCD televisions, and last month agreed to form a venture with Taiwan’s Inventec Co. to make personal computers.