Rodman & Renshaw Starts Orion Energy Systems (OESX) at Buy

Rodman & Renshaw initiated coverage on Orion Energy Systems (NASDAQ: OESX) with a Buy rating and a price target of $2.50. Analyst Amit Dayal expects LED sales to be the key growth driver for Orion Energy, accounting for over 90% of revenues by FY2018.

"We view OESX as a transformation story, wherein management has been navigating the company’s operations to move away from being a vertically integrated fluorescent lighting company to an asset light LED solutions provider. This process has taken a few years and included the unwinding of various tooling, sale of non-essential manufacturing infrastructure and establishing new supply relationships. Not surprisingly the company’s margins dropped to the low 20% levels as the turnaround was being executed," said Dayal

"We believe the turnaround is now mostly complete. The company’s revenues now comprise of 75-80% contribution coming from LED product sales and the remainder from fluorescent products. We believe investors should expect this revenue mix to remain in place for the next 12 to 18 months with LED contribution continuing to grow beyond that period," continued the analyst.

Dayal added, "In our opinion: 1) this turnaround has now focused OESX on the LED market, one of the key growth areas in lighting, substantially improving the company’s revenue growth prospects; and 2) the move to an asset light model has already resulted in margins improving to the high-20% levels and expected to further grow to mid-30% levels over the next few years."

For an analyst ratings summary and ratings history on Orion Energy Systems click here. For more ratings news on Orion Energy Systems click here.

Shares of Orion Energy Systems closed at $1.20 yesterday.

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