SEOUL, Jan 11 POSCO 005490.KS, the world's third-largest steel maker, reported a

SEOUL, Jan 11 (Reuters) POSCO , the world's third-largest steel maker, reported a better-than-expected 157 percent rise in quarterly profits on Thursday, helped by higher steel prices and lower costs.

The South Korean steel maker forecast its 2007 sales would rise 6.3 percent from a year ago, and said it expected stable Asian steel prices and steel demand.

POSCO earned a net profit of 936 billion won ($997.5 million) in the three months to Dec. 31, compared with 364 billion a year ago.

The figure for the fourth quarter of 2005 was modified from 381.5 billion won following a change in POSCO's accounting methods.

The result was well above a consensus forecast of 780 billion won, according to seven analysts surveyed by Reuters, although some in the market feel the firm's shares reflect POSCO value.

''Investors had been expecting good results, which explains the recent pick-up in share prices. But we are more neutral on POSCO. We believe the share gains have discounted most of the positive outlook,'' said Lim Chang-gue, fund manager, Samsung Investment Trust Management.

Fourth-quarter sales were 5.4 trillion won, up 4.0 percent.

POSCO has raised prices of its main domestic steel products by up to 8.3 percent in July. It also raised stainless steel product prices by 6 percent in October.

Analysts say POSCO will push ahead with further cost savings in 2007 by using more low-priced raw materials. For 2006, the company estimates total cost savings will exceed 1 trillion won.

For full year 2007, POSCO is projected to post a 3.42 trillion won net profit, 6.6 percent higher than last year, according to Reuters Estimates.

POSCO forecast its sales at 21.3 trillion won in 2007, compared with last year's 20.0 trillion.

Its crude steel output was forecast at 30.6 million tonnes compared with 30.1 million in 2006.

Before the earnings announcement, shares in POSCO, South Korea's third-largest company with a market value of almost $29 billion, closed up 1.22 percent at 290,000 won against a 0.7 percent rise in the broader market <.ks11>.

The stock rose 26 percent in October-December, outperforming a 4.6 percent gain in the broader index.

($1=938.3 Won) REUTERS CS DS1302