Friends hi-fi system not very good, what do you do or say?

Context is important.  The OP stated that the owner was giving him a tour of their house which implies that this is either a new or casual friend.  He didn’t invite them over for a “listening session” of a shared hobby.  

I’d tell them that’s ‘ Ugly Junk ’ you should see what I have !! Lol….

Cheers

The irony is your friend would likely not like your system as well. It might sound too dead to him or too lively. ;-)

But telling him you don't care for his system would be a demonstration of poor social skills and would reflect badly on you. You probably know that though. ;-) 

So what do you do when they ask you what you think?

I’d look them in the eye and say,

”I’m sorry, I couldn’t hear you with the static coming from…are those speakers?”

  or

”I enjoy it very much, just like my car system. Did you get this from yours?”

  or

”I thought you were driving out rodents - sonically”

…..if I was an audiophile snob ;)

I think you should appreciate it from their perspective.  After all, they're sharing something they're proud of.  You could ask, how long have you had it, how did you determine their choices, what do they like about it, what would they change if they had the opportunity or money?  At that point some good talking points might come up where you could share your ideas, modestly of course. They might get inspired to come here yours, or they might ask some inside questions, or they may clam up, at which time you know to just sit back and enjoy your visit with your friend.