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Press Release:


Pearl River IPO Raises $100 Million

PEARL RIVER PIANO GROUP Co.., Ltd., China's largest manufacturer of acoustic pianos, has completed an IPO on the Shenzhen Stock Exchange, selling 48 million shares and raising $102,149,913. The share offering marks the successful transition for Pearl River from a state-owned enterprise to a publicly owned stock company. Shares are now traded daily under the symbol 002678. Pearl River's finances reveal a well-run, highly profitable organization that is benefiting from a surging domestic Chinese piano market. For the most recent fiscal year, Pearl River sales advanced 19.4% to $185.2 million, which followed a 16% gain the previous year. The company's gross profit has trended up over the last three years, indicating strong pricing power and factories operating at capacity. Gross profit in 2011 was $56.1 million, compared with $50.4 million in 2010, and $41 million in 2009. Profits for the calendar year ending December 31, 2011 were up 25% to $27.3 million.
Company president Shi Shao Bin and his executive team have run Pearl River with little outside financing. According to its latest reports, Pearl River has little long-term debt, and short-term liabilities stand at just $55.6 million. This conservative approach has allowed the company to build a substantial base of shareholder equity, which now stands at $145 million. Mr. Shi was recently named to the top post at the company following the retirement of Mr. Wang Run Pei.
Pearl River began more than 50 years ago, producing a mere four upright pianos a month. Since then it has become not only China's best-known domestic brand, but also a top-seller throughout the world, accounting for 30% of the Chinese market, 18% of the American market, and 15% of the European market. Production has grown to more than 100,000 pianos each year in a factory covers three million square feet including a main building that's seven stories tall and a quarter mile long. More than 2,000 skilled workers occupy a network of factories, foundries, lumberyards, and sawmills. The complex also includes a 90,000-square-foot testing and engineering lab with 200 technicians, most of whom have advanced degrees in areas such as adhesives, metallurgy, and chemistry.

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18% share of the American market?

Do you think that is true?

That would mean roughly 7,000 - 8,000 units per year. Realistic?

I don't have the actual figures, but it doesn't sound reasonable to me, even including brands made by PR but with a different branding.

Me either

Actually, I think it's more like 5,000 units, which would be possible if you consider all the brands - Hallet&Davis, Essex, Pearl River, Ritmuller, other private labels (German and not so German) and of course, the 1,500 Kayserburgs I have personally sold .

Given the balance sheet, $100m seems like only a small percentage must have gone up for sale. What company sells for less than twice earnings? This must represent a minority of public ownership...not I think of as publicly traded.

The report is more interesting for the confusion it causes than the news presented. Hailun's IPO is expected to raise more but by offering a greater share to the public.

100,000 pianos a year...who in the heck are all these people buying the pianos????
does this mean 100,000 potential new members to PW?

Depends; how well do you understand Mandarin or Cantonese?

And therein lies the answer!

Domestic sales in China are very brisk.

Good for them. I hope all those kids learn to appreciate music while they're at it.

In fact this is quite typical for a new IPO. It's actually rare that they would sell anything close to a majority of the total share count during an IPO. Typically insiders are only allowed to sell a small fraction of their shares (especially senior execs and early employees). If you look at the number of shares that Facebook sold in their IPO - you will find it was around 17% or and I don't know any financial analyst that wouldn't consider FB a publicly traded company. There are plenty of other examples of publicly traded companies where the principals maintained majority ownership for many years.