Aug. 18 (Bloomberg) -- Ulvac Inc., the Japanese maker of equipment used to make liquid-crystal displays and chips, said it aims to quadruple its profitability by expanding sales at its materials and solar-panel-gear businesses.

The company plans to raise the operating profit margin to 10 percent, from 2.3 percent projected this fiscal year, Chief Executive Officer Hidenori Suwa said in an interview yesterday, declining to specify when the target will be met. Sales may rise to about 400 billion yen ($4.2 billion), from 240 billion yen this year, he said.

“The sales outlook is a good first step but the company’s profit ambition is too low,” said Tetsuya Wadaki, a Tokyo-based analyst at Nomura Holdings Inc., who has a “buy” rating on the stock. “Ulvac has a lot of products not offered by rivals, making even a 20 percent margin an attainable target.”

Ulvac, whose share price has doubled this year, plans to triple the portion of sales generated by the materials operations from the 11 percent forecast for this fiscal year to reduce the company’s reliance on display-making equipment, Suwa said. Tokyo Electron Ltd., the world’s second-largest maker of precision gear for chips and screens, is projecting its first annual loss in seven years after the global recession forced customers to scale back investments.

“Expanding the materials operations will help reduce earnings volatility inherent in the equipment-oriented business model,” Suwa said. “The problem with depending on equipment is in the long development cycles, additional costs and low unit shipments, all of which contribute to slimmer margins.”

Shares of Ulvac fell 0.7 percent to 2,690 yen as of 10:01 a.m. on the Tokyo Stock Exchange, compared with a 0.1 percent gain by the benchmark Nikkei 225 Stock Average.

Ulvac, based in Kanagawa Prefecture, south of Tokyo, last week forecast net income will rise 36 percent to 1.1 billion yen in the year ending June 30, 2010. Operating profit, or sales minus the cost of goods sold and administrative expenses, will climb 61 percent to 5.6 billion yen, the company said.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net.

Last Updated: August 17, 2009 21:22 EDT