Step 1

Preheat oven to 350 degrees F (175 degrees C). Grease a 2-quart baking dish.

Step 2

Beat milk, egg, garlic powder, and hot pepper sauce in a bowl.

Step 3

Bring water and salt to a boil in a saucepan; cook and stir grits in boiling water until thickened, 3 to 5 minutes. Remove from heat; add butter and about 1/2 of the Cheddar cheese. Stir egg mixture into grits and pour grits into the prepared baking dish. Sprinkle remaining Cheddar cheese over grits.

Step 4

Bake in the preheated oven until cheese is melted and grits are set, about 1 hour. Allow grits to cool 20 to 30 minutes before serving. Grits should be cornbread-like.