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Nissan Motor Co. raised its annual forecasts as its big drive into emerging markets pays off, helping it post a smaller decline in quarterly profits than domestic rivals.

Chief Executive Carlos Ghosn has aggressively pushed Japan's No.2 auto maker into fast-growing markets such as China, India and Russia, and is credited for raising its profile as an eco-friendly brand with the launch of the Leaf, the world's first mass-volume electric vehicle, in December.

Nissan has been a standout particularly in China, where a lineup of small cars that qualified for tax incentives fuelled a 36 per cent sales growth last year. It was also among the few brands to grow in the tepid European market helped by the new Juke crossover and the older Qashqai SUV.

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While Nissan also boosted its share in the United States, analysts said it would face tougher competition this year from rivals such as Honda , which has two mass-volume models, the Civic and CR-V, due for an overhaul.

"If you're looking at earnings and the state of things now, (my pick is) Honda," said Toshiro Yoshinaga, an analyst at Aizawa Securities. "But if you're looking for the car maker with the most longer-term promise, it is Nissan," he added, citing its stated goal to lead in the zero-emission vehicle field.

For the year to March 31, Nissan, owned 43 per cent by France's Renault SA , raised its operating profit forecast to ¥535-billion ($6.50-billion U.S.) from ¥485-billio, matching the projection in a survey of 26 analysts by Thomson Reuters I/B/E/S.

It lifted its global sales forecast by 65,000 units to 4.165 million vehicles for the year, mainly on better-than-expected sales in China in the last quarter.

October-December quarterly profit fell 15 per cent to ¥114-billion, also smack in line with an average estimate of ¥113.9-billion in a Reuters poll of eight analysts, hit by a stronger yen and sliding Japanese demand. Net profit jumped 78 per cent to ¥80.07-billion.

Nissan's profit made in China is counted at the operating level, unlike those of Toyota Motor Corp. and Honda, because it reports under Japanese accounting rules.

Nissan's shares have gained 12 per cent over the past three months, trailing Toyota and Honda's shares Before the results were announced, Nissan's shares ended up 2.5 per cent at ¥89.

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Other auto makers are also making a big push in emerging markets, with Renault's French rival, PSA Peugeot Citroen announcing its move into the Indian market on Wednesday after reporting a return to profit in 2010.

India's Mahindra & Mahindra reported a 79-per-cent jump in quarterly profit, sending up its shares in Mumbai.

In the third quarter, Nissan's global retail sales grew 15 per cent, bringing its 2010 tally to a record 4.08 million units and ahead of Honda for the first time since 2005. It sold a quarter of that in China, making the country its single-biggest market for the first time.

But a slowdown in China's overall car demand could hit Nissan the hardest after the government pulled the plug on incentives on cars with engines smaller than 1.6 litres such as its Tiida model, at the end of 2010.

Corporate vice-president Joji Tagawa however said that Nissan expected to grow at a fast clip of 12 per cent, taking its Chinese sales to 1.15 million units this year.

"We expect a more sustainable growth in the overall Chinese auto market this year," he told a news conference, saying growth of about 30-40 per cent seen in the past few years was not necessarily healthy.

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Mr. Tagawa said China will remain a crucial market for Nissan, both in terms of sales volume and profit, adding that a broad model line-up and a big presence in the fastest-growing inland markets would help the brand grow faster than rivals.

"There might be some impact (of the end of tax incentives in China), but as long as Nissan can boost sales of bigger cars, it should be able to meet its sales target," said Fujio Ando, an adviser at Chibagin Asset Management.

While analysts are bullish on Nissan's shorter-term growth prospects, Mr. Ghosn is under the gun to provide a clearer direction for partner Renault, which has struggled due to its heavy reliance on Europe. Ghosn is set to announce a new strategic six-year plan for Renault on Thursday.

The Renault-Nissan alliance's all-out drive into the electric vehicle (EV) segment is a centrepiece of its growth strategy, but sales are not expected to reach critical mass until for another five years, contributing little to their near-term earnings.

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