UPDATE 2-Taiwan's AU returns to profit as LCD prices rise

* Q3 net profit at T$7.4 bln after three qtrs in the red

* Performance beats forecasts for T$6.69 billion

* Stock down 2.3 percent before results

* TV, PC panel prices seen falling in Q4

(Adds details in paras 1-3)

By Baker Li and Argin Chang

TAIPEI, Oct 22 (Reuters) - Taiwan's AU Optronics Corp (2409.TW), the world's No.3 LCD maker, which posted its first net profit in a year on Thursday, expects PC and TV panel prices to fall in the fourth quarter.

AU expects its average selling prices for TV panels in the fourth quarter to fall by a low single-digit percentage from the the previous three months, even though shipments will likely rise, company executives told an investor conference.

Prices of PC panels will also fall in the fourth quarter with shipments dropping during the same period.

"The industry is entering a seasonal cycle but we don't see much negative economic factor for the rest of the year," AU Vice President Paul Peng told an investor conference.

AU's results in the third quarter are in line with other makers of liquid crystal display (LCD) screens, which over the past several months have managed to recover quickly from a severe slowdown, riding largely on the popularity of flat-screen TVs.

LG Display (034220.KS), the world's No.2 maker of LCD screens, posted a record operating profit for the third quarter but said LCD prices could fall in the next quarter. [ID:nSEO366638]

AU (AUO.N), a supplier to brands such as Dell Inc (DELL.O), Hewlett-Packard Co (HPQ.N) and Sony Corp (6758.T), booked a net profit of T$7.4 billion ($230 million) in July-September.

That is a sharp rise compared to a net profit of T$860 million a year ago as growing demand for computers and flat-screen TVs boosted display sales and prices.

The company reported a net loss of T$6.6 billion in the second quarter.

Analysts had expected AU Optronics to earn T$6.69 billion in the third quarter, according to the latest consensus forecast by Thomson Reuters I/B/E/S.

"Benefiting from better market demand and higher panel prices, our operating results improved significantly from the previous quarter," AU Chief Financial Officer Andy Yang said in a statement.

Ahead of the results, AU's Taipei-listed shares closed down 2.34 percent on Thursday. Smaller local rival Chi Mei Optoelectronics 3009.TW lost 1.2 percent, similar to the main TAIEX's .TWII fall.

AU shares edged up 0.6 percent in the third quarter, lagging the big board's 17 percent gain, while Chi Mei, which reports earnings next week, lost 2 percent. AU shares hit the year's highest level in late July but have since faltered. (US$1 = T$32.3) (Reporting by Baker Li, Editing by Valerie Lee)