* Valeo H1 figures fall short of market expectations
* Valeo shares underperform rival Faurecia
* Valeo reiterates full year targets
By Laurence Frost
PARIS, July 21 (Reuters) - Valeo shares tumbled on Friday after the French auto parts maker reported first-half sales and earnings that fell short of market expectations, despite a strong order book.
The stock fell 3.4 percent in early session trading, making it one of the worst performers on the pan-European, benchmark STOXX 600 index, which was down 0.1 percent.
Valeo shares also underperformed a 0.8 percent rise at rival Faurecia, whose shares touched a 10-year high after Faurecia - in which carmaker PSA has a stake - raised its guidance on Friday.
Valeo reported late on Thursday a 20 percent profit gain and 16 percent revenue increase for the January-June period.
Yet despite an orders "blowout", those numbers revealed "disappointing yet explainable lower organic growth and low free cash flow", said Evercore ISI analyst Chris McNally.
Stripping out acquisitions and currency effects, Valeo's 9.464 billion euros ($11 billion) in revenue represented a 9 percent gain but missed the 9.558 billion expected by analysts, based on the median of nine estimates polled for Reuters. Operating and net income figures also fell slightly short.
Under Chief Executive Jacques Aschenbroich, Valeo is positioned to benefit from a widespread regulatory emissions crackdown thanks to its push into electric-car and other fuel-saving technologies. It has also become a significant autonomous driving player in partnership with Israel's Mobileye .
The order intake, up 16 percent at 14.9 billion euros, promises strong sales on a two- to three-year horizon, but a near-40 percent jump in capital expenditure had some analysts worried about nearer-term margins.
"Valeo is an equity market darling," said Max Warburton of Bernstein. But the results "may again raise questions about the pace, cost and ultimate profitability of growth," he added.
Valeo reiterated full-year goals, including sales exceeding global auto demand growth by five percentage points and a slight increase in the group's operating margin.
$1 = 0.8593 euros Reporting by Laurence Frost; Editing by Sudip Kar-Gupta