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UPDATE 2-Thales beats first-half forecasts and sees positive trend

* Transport unit climbs out of red

* New orders also up

* Reaffirms targets, shares rise (Adds details, background)

PARIS, July 26 (Reuters) - French defense and aerospace company Thales reported better than expected first-half profit and sales on Wednesday as new orders rose and the company's transport infrastructure division climbed out of the red.

Europe's largest defense electronics supplier said it was too early to gauge the impact of short-term defense budget cuts in France but hailed plans by President Emmanuel Macron to boost spending in the coming years.

"The trend is clearly positive with 50 billion euros in defense spending at the horizon of 2025; globally the trend is positive," Chief Executive Patrice Caine told analysts.

He played down concerns about a tussle in the aerospace industry between jetmakers and suppliers of services worth billions of dollars a year, which planemakers want to wrest away from contractors such as Thales to try to boost margins.

"When I look at what they intend to do and (what) we do, or we can do, it's more complementary than overlapping," Caine said, adding that Thales was in constructive talks with Airbus on the issue.

U.S. rival United Technologies said on Tuesday planemakers could face higher prices for engines and other parts if they wade too deeply into the aftermarket for services, which is traditionally the domain of their suppliers.

Thales said its first-half operating margin grew 0.7 of a percentage point to 8.8 percent, beating expectations.

By contrast, Airbus is expected to report an adjusted second-quarter operating margin of 5.8 percent when it issues first-half earnings on Thursday, illustrating the profitability gap between planemakers and their main suppliers.

Thales said first-half profit rose 16 percent, or 17 percent on an underlying basis, to 637 million euros ($741 million) on revenue of 7.241 billion, a rise of 5.8 percent, or 5.9 percent in organic terms. It reaffirmed its 2017 and mid-term targets.

Analysts were on average looking for operating profit of 588 million euros on sales of 7.138 billion.

Shares in Thales rose 2 percent, outperforming the SBF120 Paris index, which was up 0.8 percent at 1010 GMT.

Thales posted a 10 percent increase in new orders to 5.972 billion euros, dominated by defense and security contracts in mature markets as emerging markets generally marked a pause.

It bagged eight contracts worth more than 100 million euros in the first half compared with three a year earlier.

"We are looking at a gradual improvement in Thales's profitability," Finance Director Pascal Bouchiat told reporters.

The company's net cash pile dipped only slightly to 2.294 billion euros from 2.366 billion at the end of 2016 after a "temporary slowdown" in investment.

Bouchiat said the group had no plans to increase its 35 percent stake in state-controlled French naval shipyard Naval Group, formerly known as DCNS. Thales did, however, reiterate its interest in expanding in cybersecurity. ($1 = 0.8595 euros) (Reporting by Tim Hepher and Cyril Altmeyer; editing by David Clarke)