South Korean shipbuilders, this year's worst-performing industry group, are attracting buy recommendations from three of the nation's biggest brokerages after valuations sank to record lows. Hyundai Heavy Industries, Samsung Heavy Industries and three other listed shipbuilders lost an average 40 per cent in the year so far, compared with a 0.1 per cent gain in the Kospi 200 Index. The shares trade at 0.7 times net assets, against a multiple of 1.1 for the Kospi 200. While a strengthening won and falling ship prices spurred the industry's biggest second-quarter loss since at least 2010, bulls from Hana Daetoo Securities to JP Morgan Chase say the worst is over as new container vessel orders replace older unprofitable contracts. China, the world's biggest exporter, reported a bigger-than-estimated jump in overseas shipments last month while a measure of commodity shipping rates jumped 50 per cent from this year's low. "The only way they can go now is up," said Park Moo-hyun, an analyst at Hana Daetoo Securities. "Earnings can't get any worse than the second quarter. The bright side is that there is still strong demand for new ships." While shipbuilding's importance to the economy has diminished since the 1970s, the nation's 10 biggest shipyards still employed 183,022 people last year. The average price-book ratio for Hyundai Heavy, Samsung Heavy, Daewoo Shipbuilding, Hyundai Mipo and Hanjin Heavy Industries dropped yesterday to the lowest level since March 2011. The 33 per cent discount to the Kospi 200 is the widest on record. "The stock prices of Korean shipbuilders have hit the bottom," said Lee Sokje, an analyst at JP Morgan Securities Asia who has an overweight rating on the industry. "Share prices will see sharp gains towards year-end." Korean shipbuilders are recognising losses from contracts they signed about two years ago, when prices for vessels globally were near the lowest level since 2003 and shipyards took the risk of operating at a loss rather than leave their factories idle. Ship prices have since rebounded 10 per cent, according to Clarkson, the largest shipbroker. Earnings would start to recover by the next quarter, said Han Young-soo, an analyst at Samsung Securities. Hyundai Heavy is building five of the world's biggest container ships, capable of carrying 19,000 containers, for China Shipping Container Lines. "This is as far as we can be shocked in terms of earnings," said John Yu, an analyst at Woori Investment and Securities, whose top pick is Hyundai Heavy. "The latter half is definitely looking brighter than the first half."