Comprehensive Musical Instrument Player Competing Globally
The author is an analyst of NH Investment & Securities. He can be reached at
esshim@nhqv.com. -- Ed.
Established in 1958, Samick is a global comprehensive musical instrument firm that was listed on the Kospi in 1988. It produces and sells various instruments, including pianos and guitars. Both ongoing sound sales of guitars (spurred by the US-China trade dispute) and anticipated piano sales growth in China (once pandemic effects ease) should lead overall top-line growth going forward.
Comprehensive musical instrument player competing globally
As a player with 64 years of experience in the field of musical instruments, Samick Musical Instruments (Samick) produces and sells a wide variety of instruments, including pianos and guitars. Its main subsidiaries include Samsong Caster, Suwan Energy, an Indonesian manufacturing player, and sales offices in China, the US, and Germany. Samick has expanded its brand line to the high-end categories by acquiring SEILER, a German piano company maker, and it has established itself as a global comprehensive instrument manufacturer via its OEM business for Gibson and Fender guitars.
Sales growth being spurred by trade wars and pandemic effects
Last year, Samick’s annual sales in the North America upped to W82.4bn (+58.9% y-y, unconsolidated). We attribute the sharp growth to higher OEM sales for guitars thanks to: 1) major OEM customers’ production base transfers in response to the US-China trade disputes; 2) increased demand for learning guitar amid the Covid-19 crisis; and 3) the significant growth of the short-form video SNS industry (including TikTok and YouTube), which has resulted in larger numbers of people playing musical instruments.
Even though the global pandemic has passed its peak, we expect Samick’s guitar sales to continue rising. We believe that the increased public interest in playing instruments will be further stoked by both a lower entry barrier for learning an instrument and a diversifying performance environment. Although a recovery in Samick’s piano sales in China has been delayed by lockdown effects, the firm is expected to benefit over the long term from higher numbers of the Chinese population playing instruments as a result of both the abolition of the Chinese government’s previous birth control policy and improved living standards.
Since last year, Samick has been strengthening its financial structure via the land & building disposals and a capital increase for one of its subsidiaries. In addition to gains from the asset disposals, the firm’s profitability should improve further on a reduction in its interest expenses. Considering Samick’s asset value as well as its earnings growth potential, we view its shares as being markedly underappreciated.