Canada Submarine Order Fails, Shipbuilding Stocks Plunge – Is It a Real Crisis? Cheaper Than the 2007 Supercycle Peak: Current Valuation Assessment

Summary

Eom Gyeong-a, Research Fellow at Shinyoung Securities, argues that the recent plunge in Korean shipbuilding stocks following the Canadian submarine order loss is a massive overreaction. She explains that the lost export order was never in earnings estimates, fundamentals remain rock-solid, Q2 2026 earnings should surprise with industry-wide double-digit margins, and newbuilding prices are near all-time highs. Valuations have halved and are now cheaper than during the 2007 supercycle. She views the pullback as a buying opportunity in large shipbuilders, with equipment stocks as a cheap plus-alpha add-on.

• Korean shipbuilding and defense stocks fell sharply after losing a Canadian submarine contract.
• The submarine order was not factored into earnings forecasts, so fundamentals are undamaged.
• All listed shipbuilders are expected to report double-digit operating margins for the first time in Q2 2026.
• Newbuilding prices are about to break the historical high, and slot scarcity supports continued pricing power.
• Valuations (PBR) have halved and are now below the peak levels of the 2007 supercycle.
• Equipment stocks like Korea Carbon are also deeply cheap (PER ~8x) and offer upside as shipbuilders recover.
• Global submarine and special-ship demand remains strong, leaving many future opportunities.