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I just finished a scenario where a Chinese CV was hit by several small ASMs which did no equipment damage but caused a huge fire and major flooding. I switched sides to see what the effect of the attack was. The fire was eventually extinguished at the 38% damage level and the Flooding stopped at at 49.8% It stopped landing planes but it continued to ready planes. It slowed to 10 knots at full speed. At no point did any equipment get damaged or destroyed by the fire or flooding.

Is this correct behavior?

I would have thought that damage would be cause by the fires. I'm sure I've seen it in baloogan video but I'm no expert.

There is a probability of fire/flooding damage causing component damage, which is inversely proportional to the size & displacement of the vessel (the bigger the boat, the more severe the fire/flooding must be before components start being affected).

Perhaps the threshold is too high for very large vessels?